CPAR 2008

PHILIPPINES

A Joint Document of

The Government of the Philippines, The Asian Development Bank and The World Bank

October 3, 2008

PHILIPPIN

ES CO

UN

TRY PR

OC

UR

EMEN

T ASSESSM

ENT R

EPOR

T

47602

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Acronyms and Abbreviations 3Preface 4Foreword 6Executive 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 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

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

Cont

ents

ADB AsianDevelopmentBankAF AsiaFoundationAPP AnnualProcurementPlanAPPI AgencyProcurement PerformanceIndicatorAusAID AustralianAgencyfor InternationalDev’tBAC BidsandAwardsCommitteeBIR BureauofInternalRevenueBIS BaselineIndicatorsSystemBLI BaselineIndicatorsCAC CoalitionAgainstCorruptionCAS CountryAssistanceStrategyCBCP CatholicBishops’Conference ofthePhilippinesCIDA CanadianInternational DevelopmentAgencyCOA CommissiononAuditCOFILCO ConfederationofFilipino ConsultingOrganizationsCPAR CountryProcurementAssessment ReportCPI Compliance/Performance IndicatorsCSC CivilServiceCommissionCSO CivilSocietyOrganizationCWG CPARWorkingGroupDAC DevelopmentAssistance CommitteeDBM DepartmentofBudget& ManagementDENR DepartmentofEnvironment& NaturalResourcesDepEd DepartmentofEducationDPEM DevelopmentPlanningand EnvironmentalManagementDILG DepartmentofInterior&Local GovernmentDND DepartmentofNationalDefenseDO DistrictOfficesDOF DepartmentofFinance

CURRENCYCurrencyUnit=PhilippinePeso(Php)

US$1.00=Php46(June2007)

FISCAL YEARJuly1–June30

ACRONYMS AND ABBREVIATIONS

DOH DepartmentofHealthDPWH DepartmentofPublicWorks &HighwaysDTI DepartmentofTradeand IndustryEGP E-GovernmentProcurementGDP GrossDomesticProductGFIs GovernmentFinancialInstitutionsGOCC GovernmentOwnedand ControlledCorp’sGOP GovernmentofthePhilippinesGPMs GenericProcurementManualsGPPB GovernmentProcurement PolicyBoardGPRA GovernmentProcurement ReformActIAEB InvitationtoApplyforEligibility &toBidIAU InternalAuditUnitICM InitiatingConceptMemorandumIDF InstitutionalDevelopmentFundIOM InternationalOverseas ManagementIRRA ImplementingRulesand RegulationsPartAIRRB ImplementingRulesand RegulationsPartBISO InternationalOrganization forStandardizationJBIC JapanBankforInternational CooperationLAIKO CounciloftheLaity ofthePhilippinesLB LeagueofBarangaysLCP LeagueofCitiesofthePhilippinesLGA LocalGovernmentAcademyLGUs LocalGovernmentUnitsLMP LeagueofMunicipalities ofthePhilippinesLPP LeagueofProvinces ofthePhilippines

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

MDB MultilateralDevelopmentBankNCB NationalCompetitiveBiddingNEDA NationalEconomic &DevelopmentAuthorityNGAs NationalGovernmentAgenciesNGAS NewGovernmentAccounting SystemOECD OrganisationforEconomic Cooperative&DevelopmentOMES OptimisedMicroturbine EnergySystemsPAGC PresidentialAntiGraftCommissionPBDs PhilippineBiddingDocumentsPCA PhilippineConstructors AssociationPDF PhilippineDevelopmentForumPER PublicExpenditureReviewPhilGEPS PhilippineElectronicProcurement SystemPICE PhilippineInstituteof CivilEngineersPPMP ProjectProcurement ManagementPlanSEC SecuritiesandExchange CommissionSGV Sycip,Gorres,Velayo&Co.SMEs SmallandMediumEnterprisesSUCs StateUniversitiesandCollegesSWS SocialWeatherStationsTAF TheAsiaFoundationTAN TransparencyAccountability NetworkTSO TechnicalSupportOffice oftheGPPBTWG TechnicalWorkingGroupUGB UniformGuidelinesfor BlacklistingUNDP UnitedNationDevelopmentProgramUSAID USAgencyforInternational DevelopmentWB WorldBank

3

Date and Basis of the ReportAttheMarch2006PhilippineDevelopmentForum(PDF),the

Government of the Philippines (GOP) and its development

partners, including the World Bank (WB), the Asian

Development Bank (ADB), the Japan Bank for International

Cooperation (JBIC), United Nation Development Program

(UNDP),theEuropeanCommission(EC),TheAsiaFoundation

(TAF), and bilateral donors (USA’s USAID, Australia’s AusAid,

Canada’s CIDA), discussed the importance of pursuing

procurementreform.Thepartnersagreedthatitwastimeto

assess thenewpublicprocurementsystemmandatedbythe

2003procurement law,andtosetplanstobuilduponwhat

hadbeenthusfarachieved.AnewCPAR,thedocumentthat

records theprogressofprocurement reform,wasneeded to

diagnosethehealthoftheexistingpublicprocurementsystem

and,intheprocess,renewthedialoguebetweentheGOPand

allstakeholderstodetermineandagreeontheactionstopush

theneededreformsfurther.ThisCPARprocesswouldbethe

secondfullexercise,thefirstCPARhavingbeencarriedoutin

2002,withupdatesin2003and2005.

InJune2006,theInitiatingConceptMemorandum(ICM)for

theconductoftheCPARprocesswasdiscussedandfinalized,

includingmeetingswith theGOPanddevelopmentpartners

tosecurecriticalsupportfor,participationin,andcommitment

to the CPAR process. On the basis of the objectives, scope,

andactivitiespresentedintheICMandagreedfollowingthe

guidance of the June 29, 2006, review meeting, a team of

WBstaffandconsultants,andrepresentativesofdevelopment

partners conducted the review and assessment from July

2006toFebruary2007.SWS,a localsurveyfirm,conducted

asurveyandfollow-upin2006-07onthepublic’sperception

of procurement and how it could contribute to combating

corruption. The survey was coordinated by TAF and funded

byUSAID.Theassessmentresultwasintegratedwiththatof

theGOP’sOECDBaselineIndicatorAssessmentinanintensive

three-day workshop in Canyon Woods Resort, Province of

Laguna, in late May 2007, where participants agreed on

an action plan to push procurement reform forward, with

particularfocusonenforcementandcombatingprocurement-

basedcorruption.Basedontheintegratedassessmentresult,

theCPARTeamdraftedandfinalizedtheCountryProcurement

AssessmentReport.

TheCPARTeamwasledbyMs.CeciliaVales(LeadProcurement

Specialist and Task Team Leader, EAPCO) and includedWB’s

Dominic Aumentado (Procurement Specialist, EAPCO), Rene

SD. Manuel (Procurement Specialist, EAPCO), Noel Sta.

Ines (Procurement Specialist, EAPCO), Leonora Gonzales

(Senior External Affairs Officer, EACPF), Cecilia Verzosa

(Communications Adviser, EXTCD), and ADB’s Candice

McDeigan(ProcurementSpecialist),aswellasconsultantsDavid

Howarth(internationalprocurementpractice),JoseLuisSyquia

(baseline indicators survey and performance assessment),

HeidiMendoza(localgovernmentandcivilsociety),DennisS.

Santiago and Shalini Bhagat (legal and policy reform), Alice

Tiongson(capacitybuildingandblacklistingmechanisms),and

SofronioUrsalandRobertDoller(anti-corruptionefforts).Mr.

Jose Dalisay laymanized the text of key areas of the report

including the Executive Summary. The CPAR was edited by

SuzanneSnell(EAPPRconsultant).

TheDecisionMeetingtookplaceonMay6,2008,andthefinal

reportwasissuedtoGovernmentbeforetheendofJune2008,

andacceptedbyGOPonOctober3,2008.Implementationof

theCPARAgreedActionPlanwillbehandledandcoordinated

bythenewlycreatedPDFSub-WorkingGrouponProcurement,

whichwillmeeteveryothermonth,undertheoversightofthe

PDFWorkingGrouponGovernanceandAnti-Corruption.

Ownership of Procurement ReformThe GOP and development partners have been working

closelyonprocurementreformformanyyearsasanessential

element of good governance and an integral part of their

jointcountryassistancestrategies.Thegoalsofprocurement

workhavebeentoanalyzeand improvepublicprocurement

policies,organization,andproceduresby increasingcapacity,

improving accountability and transparency, reducing the

scopeforcorruption,andbringingsystemsintoharmonywith

internationallyacceptedprinciplesandpractices.

TheCPARprocessisthelatestphaseofthiseffortandhasbeen

spearheaded by GOP. The Government’s Procurement Policy

Board’s Technical Support Office (GPPB-TSO) collaborated

closely with the WB at the ICM stage to define the CPAR’s

objectives,scopeandmethodology,themission’sactivitiesand

timelines,andthepriorityareasforassessment.

The GPPB then organized a CPAR Working Group (CWG)

toworkwiththeWBteammembers,formingtogetherthe

CPARteam.TheCWGmembers includedthechampionsof

procurementreformintheGovernment,therepresentatives

Preface

4

of the voting and non-voting members of the GPPB, and

the development partners that comprise the PDF Working

Group on Governance and Anti-corruption. The chair of

theCWGwastheDepartmentofBudgetandManagement

(DBM), and the co-chair was the National Economic and

DevelopmentAuthority(NEDA).Sinceenforcementisamajor

areaofcoverage,theworkinggroupincludedrepresentatives

from anti-corruption agencies such as the Office of the

Ombudsman and the Presidential Anti-Graft Commission

(PAGC).Representativesfromthecivilsocietyorganizations,

privatesectorandotherstakeholderswerealsorepresentedin

theCWG,includingtheleaguesofbarangays1,municipalities,

cities, and provinces. Development partners were also

representedintheCWG.ThefullcompositionoftheCWGis

presentedinAnnex 1.

AcknowledgementsThe CPAR Team wishes to acknowledge the extensive

cooperation and assistance received from all CWG and

GPPB team members, during and between the team’s visits

and throughout many meetings, and from ADB, JBIC, TAF,

USAID, AusAID, CIDA and WB staff who provided inputs.

The CPAR Team expresses its particular thanks for the

cooperation, assistanceand inputs to the report contributed

byDBMUndersecretaryLauraPascua,whowasoverallCWG

coordinator, and Executive Directors Estanislao Granados

(ProcurementService)andRubyAlvarez(GPPB-TSO),whowere

theworkinggroupcoordinators.

AttheJune2006ICMreviewmeeting,theformerWBCountry

Director for the Philippines, Mr. Joachim von Amsberg, and

RegionalProcurementManager,ShaunMoss,offeredguidance

on the scope and overall direction of the assessment. The

present Country Director, Mr. Bert Hofman, who co-chaired

thedecisionmeetinginMay2008,supportedthefinalization

and delivery of the CPAR to the Government. Mmes. Irina

Luca (WB-AFTPC)andVeraSongwe(WB-MDO),andMessrs.

NaseerRana(WB-SARPS),andRobertRothery(ADB)provided

constructiveandvaluablecommentsasPeerReviewers.

Mr. Christopher Hoban, former WB Portfolio Manager in

Manila,andthecurrentPortfolioManager,Ms.MaryseGautier,

providedtheCPARTeamadviceandguidanceintheconduct

of the assessment. Mr. Yasuhiko Matsuda provided initial

commentsonthedraftReport.Ms.EvelynQuiranteandSusan

CristobaloftheWBCountryOfficeinManila,andAtty.Sygrid

PromentiallaandMs.MilaManalastasofGPPB-TSO,helpedthe

teaminarrangingthelogisticsforthemissionsandworkshops.

MesdamesNorGonzales,EvelynQuiranteandMariaKrizette

Hermosofacilitatedthepublicationofthedocument.

� 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

The Country Procurement Assessment Report (CPAR)processprovedtobeasuccessfulmechanisminassessingthecountry’spublicprocurementsystem,identifyingitsstrengthsandweaknesses,andprovidingaplatformforadialogueamongstkeystakeholders.ThepreviousCPARin2002anditstwoupdateshadbeenrecognized,notonlyasanassessmenttool,butmoreso,asthevehicleforrecordingtheprogressofthereformandthemeasurestopursuetomovethereformagendaforward.Moreover,ithasbecomean instrument for instituting innovativeand modern reform approaches and standards, andcementing the collaborative partnership between theGovernmentanditsdevelopmentpartners.Itisindeedcommendable to witness consistent Government’scooperation and commitment to the CPAR process,throughtheGovernmentProcurementPolicyBoardanditsTechnicalSupportOffice.

The CPAR focuses largely on assessing the country’spublic procurement system by comparing it againstinternational procurement standards, and followingthe OECD/DAC-WB Baseline Indicators for a goodperforming public procurement system. The CPARprovidesascorecardofachievementsandprogress,andidentifiesthechallengesaswellasmeasurestoaddressthesechallenges.Althoughmuchhasbeenachievedinreformingthelegislativeandregulatoryframework,muchremains to be done in strengthening the institutionalframework and management capacity, enhancing thecompetitivenessofthepublicprocurementmarket,andimprovingtheintegrityandtransparencyofthesystem.TheCPARrecordstheactionplanthattheGovernmentand its development partners have agreed, includingcommitment to financial resources, to mitigate thosechallenges.

Itisworthcitingthesignificantachievementmadeintheharmonizationandalignmenteffortstowardstheuseofcountysystems.Foremostofwhichistheharmonizationof bidding documents and procurement manuals forworks, goods and consulting services that broughtthe country’s system more aligned to the proceduresof multilateral banks where less than ten exceptionswerenoted.Verywell recognized in theReport is thecommitment to pursue a harmonized eGovernment

ProcurementSystem,throughthePhilGEPS,whichwouldresulttogreatertransparencyandaccountabilityasthesystemwouldbeopenforeasycivilsocietymonitoringandscrutiny.

We wish to commend the executive and legislativebranchesofgovernmentforcontinuingtosupportandpursueprocurementreformwhichwouldbeadeterrentagainst corruption in the long term. Much will nowdependonthecontinuousimplementation,monitoringand enforcement of this key institutional and policyreform to ensure its sustainability in achieving goodgovernance.

Bert Hofman CountryDirector,Philippines EastAsiaandthePacificRegion TheWorldBank

Claudia Buentjen Officer-in-Charge PhilippinesCountryOffice AsianDevelopmentBank

Foreword

6

Foreword

WewelcometheCPARprocessasanobjectiveyardstickof the Philippine government’s accomplishment inpursuingprocurementreform.Itgivesusameasureofhowwellwehavedoneinthepast,butalsorevealstheamountofworktobedoneforthefuture.

Manychallengesremain.Forone,furtherharmonizationof our country system with that of our developmentpartners is necessary in order to fully govern theparticipation of international bidders. Thus, one ofthe recommendations of the CPAR is to finalize theimplementing rules for foreign funded procurement.Withthecooperationofourdevelopmentpartners,wehopetoaccomplishthisbeforeendof2009.

Theprofessionalizationofourprocurementpractionersis another. By pursuing the education and equippingthe front linersofprocurement reform—themembersof the various Bids and Awards Committees and itssupportunits—withthenecessaryskills,theywillsoonbe recognized as true champions andprofessionals inthefieldofpublicprocurement.

In ending, allowme tonote that only two things arecertain: Reforms do not happen overnight and thatits success depends on each of us working together.Towardsthisourdevelopmentpartnershavebeentrulyinstrumental in this process of change, providing thenecessary support when and where the governmentneedsit.

Rolando G. Andaya, Jr. Chairman GovernmentProcurementPolicyBoard

7

Executive Summary

8

Public Procurement Cycle1. Every year, the Philippine government spends hundreds of

billionsofpesostobuythegoodsandservicesitneedstocarry

out projects and deliver services to its citizens. This money

comesfromthebudget that it fundsoutof itsownrevenues

andfromloansandgrantsextendedbyforeignsourcessuchas

multilateraldevelopmentbanksandbilateraldonors.

2. Deciding how to spend this money is a very important

responsibilityon thepartofgovernment leadersandofficials,

notonlybecauseofthelargeamountsbutalsothepublictrust

involved.Citizensandtaxpayershavearighttoexpectthattheir

governmentwillspendthesefundswiselyandhonestly,forthe

greatestpublicgood.

3.Procurementisakeystepintheprocessofgettingthebest

value for the people’s peso. The process involves announcing

or advertising what the government needs, inviting qualified

partiesorindividualstooffertheirbids,evaluatingthosebids,

awarding contracts to the chosen bidders, monitoring their

deliveryandperformance,payingthemandrecordingtheresults

ofthewholeprocessforotherstosee.Italsoinvolvesmaking

sure that the bidding is fair and transparent to all, and that

anyonewithalegitimatecomplaintcanbegivenspeedyjustice.

Forthepastfouryears,anaverageofPhp121billionworthof

infrastructure,equipment,materials, suppliesandserviceshas

passedthroughthisprocesseachyear,about15percentofthe

country’s total annual budget, equivalent to about 3 percent

of its Gross Domestic Project. Thus, procurement is a major

governmentactivity.

Procurement Reform4. While the procurement process is straightforward enough

onpaper,ithasmetmanydifficultiesandproblemsinpractice.

Corruption, inefficiency, ignorance, and disorganization have

resulted in theeffective lossofmanybillionsofpesos and in

the procurement of substandard materials and services. By

oneestimate,anaverageof20percentto30percentofevery

contractgoestoleakages,oraboutPhp30billionannually.

5. While many problems arise from dishonest officials and

bidders, procurement systemsalsoneed tobe improved, and

those involved in procurement need to become familiar with

the correct methods and practices. The private sector also

needsbetterinformationandtoolsinordertoparticipatemore

activelyandcompeteonalevelplayingfield.Thegeneralpublic

needstobemadeawareoftheimportanceoftheprocurement

processandoftheneedforvigilanceinitsimplementation,so

that it can play a greater role in effectively safeguarding the

publicinterest.

6. Before 2003, the Philippines had many laws and many

agenciesdealingwithprocurement.Butbecause theydidnot

functionasaunifiedsystem,itwasverydifficulttoimplement

real procurement reform. Some rules and regulations worked

unfairly against foreign bidders who could have offered

competitiveprices.

7.Whenitfirstreviewedthecountry’spublicprocurementsystem

in 2001, the Government of the Philippines (GOP), with the

assistanceofitsdevelopmentpartnerssuchastheWorldBank

(WB),theAsianDevelopmentBank(ADB),andtheJapanBank

forInternationalCooperation(JBIC),sawthatmuchneededto

bedone.The2001-02CountryProcurementAssessmentReport

(CPAR)notedthatthesystematthattimewasat“averagerisk”

butalsofragmented,cumbersome,andpronetocorruption.

The Government Procurement Reform Act8.Abreakthroughcamewiththepassageandpromulgationin

January2003oftheGovernmentProcurementReformAct(GPRA)

(Republic Act No. 9184), “providing for the modernization,

standardization and regulation of the procurement activities

of thegovernment and forotherpurposes.” Itwasdesigned

to streamline the Philippine procurement system, reduce

opportunities for graft and corruption, harmonize the system

with international standards and practices, and promote

transparency,competitiveness,andaccountability.

9.TheGPRAreplacedwhathadbeenmorethan100laws,rules,

andregulationswithasingleunifiedpublicprocurementsystem.

It created theGovernmentProcurementPolicyBoard (GPPB),a

policy and monitoring body with the mandate of handling all

procurementmattersaffectingthenational interest. Itprovided

for standard bidding documents and for generic procurement

manualsintendedtomakeiteasierforeveryonetounderstand

andtoparticipateintheprocurementprocess.

10.TheGPRAalsoincludedanti-corruptionprovisions,including

stiffpenaltiesandsanctions–administrative,civil,andcriminal

– against offenders who are found guilty, with a minimum

criminalpenaltyofsixyearsinprison.

What Has Been Achieved11. Since the passage of the GPRA, the public procurement

system has become more efficient, and many loopholes for

9

corruptionopportunities havebeen closed. Thepromotionof

e-procurement through the Philippine Government Electronic

Procurement System (PhilGEPS) has brought the system into

thedigitalageandvastlyimprovedtransparencyandefficiency.

In implementation, standardbiddingdocumentsandmanuals

arebeingusedbythekeyactorsinprocurement,theprocuring

agenciesandtheprivatesectorproviders.Inreviewingcompliance

andclosing the loop in implementation, theauditorsand the

GPPBarenowlookingatthesamerulesanddocumentsasthe

actors,whichshouldbemakingiteasiertoconductreviewand

audit.

12. In January 2003, the GOP and its development partners

agreed to align and harmonize the new public procurement

system with the requirements of foreign-assisted projects. As

ofDecember31,2007,fourareashavebeenharmonized:the

standardbiddingdocuments,thegenericprocurementmanuals,

thetrainingofprocurementstaffandtheuseofthePhilGEPS.

Efficiencyalsoincreasedfollowingtheimpositionofdeadlinesfor

eachprocurement step.Alignmentwith internationalpractice

improved,andthenationalprocurementsystembecamemore

widelyusedfollowingtheincreaseintheNationalCompetitive

Bidding (NCB) thresholds toUS$1million forgoodsandUS$5

millionforworks.From2004to2006,atotalofPhp400billion

in contracts, or about US$8.7 billion, went through the NCB

system, including government-funded and foreign-funded

contracts.

13. Many government agencies adopted e-procurement and

have benefited from the transparency and competitiveness

it fosters. The town of Lo-on in Bohol, for example, does all

its buying online. Using competitive bidding, the Department

of Education’s bulk purchases of textbooks for all schools

nationwidesaved50percentcomparedtopreviouspractice,a

substantial saving to theeducation sector.One textbook that

wasbeingpurchasedforanaverageofPhp100camedownto

Php45incompetitivebidding.Suchexampleshaveencouraged

otherstotrythesystem.

The Challenges That Remain�4. Allegations of procurement corruption. Most recent

corruption perception surveys indicate that perception of

corruption in the Philippines remains very high. However,

procurement is ranked as strong, an indication of good

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

objectives of the reform have not been fully achieved. This

scenario is consistent with perceptions of a high level of

corruptioninprocurementandwiththeSWSsurveyfindingsthat

only13percentofthepublicisawareofthenewprocurement

lawand its intendedbenefits, andonly29percentofpeople

interviewedagreedthatcorruptioningovernmentcontractsis

lesscommonnowthanfiveyearsago.

15.Howevergoodthenewpublicprocurementsystemunder

theGPRAis,likeanysystem,itcanfallpreytodeliberateabuse

throughinappropriateuseofpower.Bythemselves,thelawand

the new procurement system alone may not be sufficient to

controleitherthegrandcorruption—thetheftoflargesumsby

high-levelpoliticiansorofficials—orpoliticalcorruption—misuse

ofstatepowerbyofficialswhoshapetherulesofthegameto

benefitthemandthosewhopaythem—thatprevailedpriorto

procurementreform,andthatarereportedlycontinuing2.The

successofprocurementreformwillrequiremeasurestostimulate

strongpublicawarenessandsupportforprocurementreform.

�6.Public Awareness: Communication of the reform to the public.MostFilipinosareunawareoftheimpactofprocurement

ontheirdailylives,throughthedeliveryofpublicservices,and

of the importanceofprocurementreform.Arecentsurveyby

theSocialWeatherStations(SWS)foundthatonly13percent

ofthegeneralpublicand30percentofgovernmentemployees

knew about the 2003 procurement reform act. A better

communicationstrategyneedstobedevisedandimplemented

toraisethepublicprofileofprocurementsothatitsstakeholders

and beneficiaries can participate more actively and safeguard

itagainstwrongdoing.Itisthereforenecessarytodeepencivil

societyandprivatesectorinvolvementinvigilantmonitoringof

procurementoperation.

�7. Procurement law implementation and enforcement.ThesesevenoftheCPAR’ssome30recommendationsarecritical

toimprovingimplementationandenforcement.

•Review, revise,and issueanational trainingprogram in line

withthestrategiccommunicationplantoensurechange in

behavior of the current crop of procurement practitioners.

Private sector should also be included to improve

competitiveness;

• Hasten the implementation of the career program of

professionalizingprocurementpractitioners;

2 Source: Accelerating Inclusive Growth and Deepening Fiscal Stability Report for Philippine Development Forum 2008, World Bank.

�0

•Improveprocurementprocessesandproceduresthroughthe

developmentofsimplerbiddingdocumentsandprocurement

manuals for small users, especially local government units,

barangays,people’sorganizationandcommunities;

•Issue policies on record-keeping and public disclosure of

documents to provide the public with better access to

procurementdataandinformation;

•ProvidefundingfortheGPPBTechnicalSupportOffice(TSO)

at a level adequate to strengthen its capacity to perform

an expanded role to oversee the implementation and

enforcementofthelaw,andtoensureitsrelevance;

•PursuetheexpansionofPhilGEPSPhases2to5,asitisthe

solee-procurementportalforthecountry.Itsexpansionwill

providereadyandadequate informationthatwillmakethe

procurementprocesstrulytransparent;and

• Preparation and issuance of Implementing Rules and

Regulations–B to institutionalize the harmonization of

procurementbiddingdocumentsandmanualsthatwillspecify

the regulatory framework for procurement under foreign-

assisted projects. This will strengthen the implementation

andenforcementofthelawandclarifytheapplicationofthe

MDBs’ProcurementGuidelines in internationalorexecutive

agreements,includingatthelocalgovernmentlevel.

�8. Procurement Policies and Mechanisms. The GPRA is

considered a good procurement law as it has incorporated

mostinternationalprocurementpractices,includingcompetitive

public bidding as the default mode, the mandatory use of

standard bidding documents, forms, and manuals, the use

of an electronic government procurement system to enhance

transparencyandaccessto information,aneffectiveoversight

policybodytooversee implementationbyprocuringagencies,

sanctionmechanismsagainsterringparticipantsintheprocess,

andotherfeatures.However,somefeaturesofthelawarenot

inaccordancewithinternationalprocurementpractices.

•Approved Budget for the Contract (ABC). GPRAmandates

imposition of an Approved Budget for the Contract (ABC)

thatsetsapricebidceiling;anybidsthatareabovetheABC

are automatically rejected. The Government’s rationale for

thisruleisthatithelpscontaintheincidenceofcorruptand

collusiveactivitiesandsofar,theGPPBhasbeensatisfiedwith

theresultof themandatory impositionofABC inall locally

fundedcontracts.However,ABCisnotanacceptablerulefor

foreign-fundedcontractsbecauseitlimitscompetition;italso

imposesparticularlimitationsininternationalbiddingbecause

internationalfirmsfacehighercoststhanlocalonesandABC

doesnotalwaystakethisintoconsideration.Infact,ABCcan

encouragecollusionamongasmallnumberofbidders.

The development partners believe that ABC should be

abolishedonce theGovernment is satisfied that its current

purposeinlimitingcollusivebiddinghasbeenserved.Thus,

they recommend that empirical data be gathered and

presented to Government demonstrating that ABC-type

priceceilingsdonotprovidelong-termbenefits.Thisanalysis

shouldbeaccompaniedbytheresultsofthreeotherempirical

studies:(i)acomparisonofcostorengineer’sestimateswith

ABC to determine how reasonable the ABC limits have

beeninpractice,(ii)andananalysisofwhetherthecurrent

lowparticipationofbidders is the resultof imposingabid

ceiling, and (iii) a report on the effectiveness of the ABC

ruleinrelationtocontractadministrationandthequalityof

completedworks.

•Absence of an independent complaints review body.An

independentadministrativereviewbodyshouldbeestablished

to accord the appeal process credibility and efficiency.

Independence is paramount in ensuring a credibledecision

ofthemeritsoftheappealand,beingadministrative,itwill

avoid the lengthy process of a judicial proceeding, which

invariablycannotbecompletedintimetofixproblemsina

procurementprocedure.TheCPARactionplanincludesthe

conductofastudytoreviewtheexistingappealsmechanism

inlinewithinternationalprocurementpractice.

• Pre-qualification and Eligibility Screening. Under the

procurementlawanditsimplementingrulesandregulations,

pre-qualificationisreplacedbyaneligibilitycheckandastrict

post-qualificationprocess. To lessen subjectivity, apass/fail

evaluationisappliedduringeligibilitycheckbasedonadefined

setoflegal,technicalandfinancialcriteria.Onlybiddersthat

passtheeligibilitycheckareallowedtosecurebiddocuments

and submit a bid. Thereafter, the winning bid undergoes

verificationandvalidationduringpostqualificationtoensure

that it has passed all the requirements and conditions as

specifiedinthebiddingdocuments.However,development

partners believe that eligbility screening, like use of ABC,

resultsinrestrictingcompetitionandhascontributedtothe

lowobservednumberofcompetingbidders (anaverageof

threepercontract).Toimprovecompetition,thedevelopment

partners recommend that empirical data be gathered and

presented to Government demonstrating that eligibility

screening is less effective than pre-qualification, and that

an independent review be conducted on the effectiveness

of eligibility screening requirements in the Philippines, in

particularfordocumentsthatarenotrelatedtothetechnical

andfinancialcapacityofthebidder.

�9. Private and public sector partnership. Conditions of

weakcompetitionthatprevailedinthepre-GPRAeracontinueto

persist.Afewprivatecompaniestendtocornerthebiddingsfor

specifictypesofcivilworksandgoods.Manycompanieswhoare

notawareofthenewpublicprocurementsystemsaidtheyprefer

nottodealwithGovernmentduetoitscumbersomeanddifficult

procurementprocesses. Legitimate companies shouldbemade

��

awareofthechangesduetotheGPRAthathavestreamlinedthe

newprocurementprocessandcreatedalevelplayingfield.An

aggressive communication strategy, including targeted capacity

building for private sector participants would strengthen the

private-publicsectorpartnership.

The CPAR20. ThisCPARistheproductofthelatestefforttomonitorand

assesstheeffectivenessofprocurementreforminthePhilippines,

spearheadedbytheGOPinclosecollaborationwiththeWBand

other development partners such as ADB, JBIC, AusAID, EC,

USAID,CIDA,TAF,andtheUNDP.TheGPPBorganizedaCPAR

Working Group, comprising the champions of procurement

reformintheGovernmentandrepresentativesofthevotingand

non-votingmembersof theGPPB,andof thedonors,private

sector,andcivilsociety.

21. The CPAR found that the country’s public procurement

system has an assessed overall risk level of Medium or

Moderate.Theoverallrisklevelisarrivedbycombiningseparate

assessments for fourmajor aspectsorpillars, as represented

graphically in Figure 1. The Legislative and Regulatory

FrameworksubstantiallymetinternationalstandardsforaLow

assessed risk level.Twootherpillars, InstitutionalFramework

andManagementCapacity,andIntegrityandTransparencyof

thePublicProcurementSystem,partiallymetthestandardsand

wereassessedashavingaMediumorModerateRisk.However,

Procurement Operations and Public Procurement Market

Performancedidnotmeetstandardsandwereassessedata

Highrisklevel.Thedetailsofthespecificriskassessmentsare

discussedatlengthinChapter3oftheCPAR.

Looking Ahead22.AlmostallweaknessesidentifiedintheCPARareaddressed

in the agreed Action Plan for 2008-10 presented at the end

ofthisreport.TheGPPBhasalreadyinitiatedconcretestepsto

addressthethreecriticalchallengesmentionedabove:allegations

of corruption, public awareness, and implementation and

enforcement.AStrategicCommunicationPlanhasbeendrafted

to increase public awareness. A long-term and sustainable

professionalization program has been designed, including a

specifictrainingmoduleforprivatesectorparticipants,andthe

certificationofprocurementprofessionalshasbeenagreed to

withtheCivilServiceCommission.ToensurethatCPARaction

planisactedupon,fundedandfulfilled,aSub-WorkingGroup

onProcurementwasformedinAugust2007undertheauspices

of the Philippine Development Forum Working Group on

GovernanceandAnti-Corruption,andwasofficiallyconvened

inNovember2007.

The Legislative and Regulatory Framework

IRR-B Foreign Assisted ProjectsInternational CompetitivePi

llar

I

Institutional Frameworkand Management Capacity

Follow-thru in Compliance Monitoring-Improve Compliance-Generation and Analysis of Data Linkage

Pilla

r IIThe Integrity and

Transparency of the PublicProcurement System

Internal Audit Role of ObserversPhilGEPS as transparency tool

Pilla

r IV

Procurement Operations and Public Procurement Market Performance

ProfessionalizationRecord KeepingPrivate Sector OwnershipPi

llar

III

Figure 1. Graphical Representation of the BLI Pillars for the Philippine Public Procurement Systems in 2006

Maximum Score

2006 Country Score

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2006 Assessment of the Philippine Procurement System

Implementing Procurement ReformSupported 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

Country Economic Context

1.ThePhilippineshashighpotentialtoachieverapidsocialand

economicprogress.Itenjoysastrongsetofassets:world-class

talent,awell-educatedpopulationof83million,richnatural

resourcepotential(mineral,oil,gas,geothermal),andalocation

that offers excellent trade opportunities. The Philippines

also benefits from a very active civil society that can be an

important agent for change. However, overall development

outcomesinthePhilippinesoverthelastdecadeshavefallen

shortofpotential,accordingtotheWorldBank(WB)Country

AssistanceStrategy (CAS)ProgressReport for thePhilippines

(June2007).Percapitagrowthhaslaggedsignificantlybehind

otherEastAsiancountries.Relativelylowdomesticandforeign

investmentflowsreflectweaknessesintheinvestmentclimate.

Investors andenterprises considermacroeconomic instability,

corruption,andpoorinfrastructureassignificantconstraints.

2. Ever since the late 1990s, the Philippine economy has

shown consistent and steady growth culminating in a 7.2

percentexpansioninrealGDPfor2007.Largelysupported

by a favorable international environment, strong domestic

consumption,andhighremittanceinflows,lastyear’sgrowth

was thehighest inover threedecades. The last timeGDP

expanded close to this was in 1988 when it recorded a

6.8percentgrowth. Thepast threeyearshavealsoshown

marked improvementsespecially in thefiscal front. Painful

reforms introduced earlier have allowed the country to

improve revenue generation and reduce its debt burden.

Similarly, the political environment has stabilized to some

extent,particularly following the recentmid-termelections,

when pre-electoral tensions and violence abated. The

electionsresultedinthePresident’spartymaintainingcontrol

of theHouseof Representatives and local chief executives’

seats,whiletheoppositionsolidifieditscontroloftheSenate.

Thenextmajorpoliticalexercisewillbethe2010Presidential

election. The ceasefire in the conflict-affected region of

Mindanaoisholding,inanticipationofthesigningofapeace

agreement,thetimingofwhichhasnotyetbeenset.

I. Background

Country Assistance Strategy

3. Inresponsetotheinitiallyuncertainpolicyenvironmentin

which the 2006-2009 CAS was prepared, the WB adopted

a strategyof supporting“islandsofgoodgovernance”as a

way of supporting institutions and reform experiences that

demonstrate how progress can be made in an environment

wherepublicinstitutionsareoftenunabletoworkeffectively

for the common good. The strategy addressed four key

objectives: (a) achieving fiscal stability to generate resources

aimed at spurring growth; (b) generating economic growth

toacceleratejobcreationandpovertyalleviation;(c)ensuring

socialinclusionandimproveddeliveryofbasicservices;and(d)

improvinggovernance.

4.During2006-2007,thePhilippines’publicfinancialsituation

enteredadecisiveturnaround.Followinganear-crisissituation

in2004,theconsolidatedpublicsector(CPS)financialposition

The WB adopted a strategy of supporting “islands of good governance” as away of supporting institutions and reform experiences that demonstrate how progress can be made in an environment where public institutions are often unable to work effectively for the common good

�3

hasbeensteadilyimproving.Fromadeficitof1.9percentof

GDPin2005,theCPSturnedintoasurplusamountingto0.1

percent of GDP in 2006 and 0.5 percent in 2007. Together

with steady real growth and an appreciation of the peso in

realterms,thenon-financialpublicdebt/GDPratiorapidlyfell

fromover100percentin2003tojust75percentbythethird

quarterof2006.Withthepositivegrowthregisteredin2007,

thePhilippineshasextendeditsruntofourconsecutiveyears

ofregistering5percentorbetterrealeconomicgrowth.

WB Portfolio

5. The WB’s portfolio in the Philippines comprises 22 active

projects,withnetloancommitmentsof$1.1billion.Sevenof

theseareintheagriculturalsector;sixsupporturbanprojects

forwater,sanitation,transport,financeanddevelopment;three

supporthealthandeducation;andtwoeachsupportpower,

social development, and judicial and administrative reform.

Portfolio risk has been stable, with the number of problem

projects remaining steady at three since 2001. The lending

programforFYs08-10currentlyincludes30proposedprojects,

including a follow-on judicial reformproject, a development

policyloan,localgovernmentsupportforperformancegrants,

sector support for social welfare, and program support for

financialmanagement information systems, agrarian reform,

and disaster management; four transport projects; three

power projects; six water and sanitation projects; and eight

loans supporting environmental actions, including wetland

andcoastalmarineenvironments,climatechangeadaptation,

two for persistent organic pollutants, three for prototype

carbonfunds,andaprogramloanforenvironmentandnatural

resources.ThecompositionoftheWB’scurrentloanportfolio

andlendingprogramisprovidedin Annex 2.

6.Asaresultofthe2007PortfolioPerformanceReview,efforts

are being made to further improve portfolio performance

throughsystematicpreparationofsemiannualprojectportfolio

reviewswithimplementingagenciesandperiodicjointportfolio

reviewswiththeAsianDevelopmentBank(ADB),JapanBank

forInternationalCooperation(JBIC),andtheGovernment.For

itspart,theWBwillpursueeffortstoaccelerateandimprove

project preparation and start-up and to closely monitor

project implementation plans agreed with implementing

agencies.Otherelementsofportfoliomanagementincludea

strengthened governance agenda, support to Government’s

ongoing reformsofprocurement andfinancialmanagement

processesinlinewiththeCASgovernanceagenda,capacity-

building initiatives,andmeasures to improvequalityatentry

andmonitoringofloansandtrustfunds.

ADB Portfolio

7.ThecurrentADBportfolio in thePhilippinescomprises42

active projects (17 loans, 24 Technical Assistants, and one

grant). Total net loan commitment is US$1,529.36 million

plus US$21.2 for Technical Assistance and US$9 million

for the grant. Over the next three years the ADB’s Country

Partnership Strategy (CPS) concentrates on addressing two

principalconstraints:uncertaintyof thebudgetoutlook,and

the investmentclimate.Tighter focus inthesetwoareaswill

eventually help the Government reduce poverty as well as

support faster achievement of the Millennium Development

Goals.Toeffectivelyaddressbudgetandinvestmentconstraints,

ADB’sCPSwillintensifyitspolicyengagementinthreebroad

areas: the power sector, financial markets, and governance,

including local government and judicial reform. High policy

engagement in theseareaswouldmanifest itself inprogram

loans,whilesupportingtheGovernment’sfiscalresponsibility

program.TheADBCountryOperationsBusinessPlanmaybe

viewed on www.adb.org/Documents/CPSs/PHI/2007/COBP-

PHI-2007.pdf.

Public Sector Procurement8.Thevolumeofpublicexpenditurepassingthroughthepublic

procurementsystemhasincreasedrapidlyinthelastfewyears.

The volume of public expenditure passing through the public procurement system has increased rapidly in the last few years. Averaging around Php121 billion per year from 2003 to 2005, procurement expenditure jumped to Php168 billion when the Government’s infrastructure program kicked off in 2006, and increased further to Php229 billion by 2007

�4

AveragingaroundPhp121billionperyearfrom2003to2005,

procurement expenditure jumped to Php168 billion when

theGovernment’s infrastructureprogramkickedoff in2006,

andincreasedfurthertoPhp229billionby2007(seeTable1).

Theincreasingtrendofbudgetaryallocationforprocurement

expenditure is a direct consequence of the increasing focus

of the Government of the Philippines (GOP) on extending

infrastructure networks and providing more services to the

public.

Procurement Reform9. The 2002 CPAR. When the GOP, working closely with

the WB and other development partners, took a good look

at itsownpublicprocurement system in1999, it sawmuch

room for improvement. The 2001-02 CPAR noted that the

system at that time was fragmented, cumbersome, and

pronetocorruption.Thereweretoomanyprocurementlaws,

rules, and regulations, and many agencies with overlapping

functions.Giventhissetup,itwasimpossibletoimplementreal

procurementreform—includingenforcement,monitoring,and

performanceevaluation—acrossthebureaucracy.Competition

amongbidderswaslow,theprocesswassusceptibletocorrupt

practices,andforeignbiddersfounditdifficulttoparticipate.

Inforeign-assistedprojects,thethresholdsfortheuseofNCB

in the Philippines were very low (averaging US$200,000 for

goodsandUS$500,000forworks),andstrictfiduciarycontrols

appliedprior-reviewthresholdsatthesamelowlevels.TheWB

identifiedmorethan20rulesthatwereunacceptablebecause

theymadeitdifficultforbidders,especiallyforeignbidders,to

participateinanybiddingprocess.

10. Preparation of the first CPAR thus became a crucial

instrument in generating dialogue allowing Government, its

key development partners, and other stakeholders to focus

andagreeonkeyreformmeasures.Followingcompletionof

thisfirstCPAR,many reformmeasureswere institutionalized

throughthepassageofanomnibusprocurement lawthat is

alignedwithinternationalbestpractices,inthatitisstructured

aroundtheprinciplesoftransparency,competition,economy

and efficiency, fairness and accountability. The Government

ProcurementReformAct (RA9184)orGPRAwaspassedby

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 45,904,4�2 56,072,555 55,595,824 69,069,682 94,372,000Capital OutlayLandandLandImprovement 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 �67,909,8�6 229,3�7,94�Percent of National Government Budget (five-year average: �4.5%) �4.78% �4.5�% �2.��% �6.07% �9.84%Percent of Gross Domestic Productat 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

10,2003,andbecameeffectiveonJanuary26,2003(15days

afteritspublicationinanewspaperofnationwidecirculation).

Thenewlawhashadamajorimpactbyeliminatingmorethan

100 laws, rules, and regulations and replacing them with a

singlepublicprocurementsystemthatisattunedtothelocal

cultureandgovernanceenvironment.Thelawalsocreatedthe

Government Procurement Policy Board (GPPB), a policy and

monitoringbodywiththemandateofhandlingallprocurement

mattersaffectingthenationalinterest.

��. Legal and institutional reform. The GPRA was the

outcome of a widely participatory consultation process

that included the key development partners and resulted in

the inclusion of international procurement best practices:

streamlined and time-bound procedures, standardization of

procurement documents, manuals and forms, mandatory

use of e-procurement, protest and complaint mechanisms,

andpenalties for procurement offenders and those involved

in corrupt practices. Organizational reforms were also

mandatedthroughthecreationofanoversightprocurement

agency, increased accountability of bidding organizations,

staff professionalization, and the presence of civil society

organizationsasobserversofthebiddingprocess.TheGPRA

also created opportunities for foreign bidders to participate

when: (a) the items are not locally available; (b) there are

parity or reciprocity rights between countries, or applicable

internationalorexecutiveagreements;or (c)whenthere isa

needtopreventasituationthatdefeatscompetitionorrestrains

trade.Thisreformhasallowedanumberofforeigncompanies

to participate in both foreign-assisted and fully government

fundedprojects.

�2.Alignment and harmonization.Harmonizationactivities

were agreed upon in January 2003 and vigorously pursued

by the GOP and its development partners, leading to the

near-alignment of the new public procurement system with

the Multilateral Development Bank (MDB) Guidelines for

foreign-assisted projects. As of February 2007, three areas

havebeenfullyharmonized:(a)standardbiddingdocuments,

throughtheissuanceinAugust2004ofthePhilippineBidding

Documents(PBDs)forWorks,Goods,andConsultingServices

as harmonized with the ADB, JBIC, and WB; (b) Generic

ProcurementManuals(GPMs)infourvolumes,asharmonized

with the ADB, JBIC, and WB, approved under a June 2006

GPPBresolution,formandatorynationwideimplementationby

January2007;(c) jointtrainingofprocurementstaffthrough

thenationaltrainingprogramusingtheStateUniversitiesand

Colleges(SUCs),whereabout50percentoftheprocurement

staffhadbeenintroducedtothelaw,theimplementingrules,

and theharmonizedPBDsandGPMsasofDecember2006.

Furtherharmonizationof implementing rules, reporting,and

monitoring has since occurred and is discussed further in

Chapter4ofthisreport(Foreign-assistedProjects).

13. The outcome of alignment efforts has been that the

nationalprocurementsystemhasbecomemorewidelyusedin

foreign-assistedprojects.ThePhilippineGovernmentElectronic

ProcurementSystem(PhilGEPS)wasassessedtobeacceptable

forMDB-fundedprojects.TheNCBthresholdwasraisedfrom

US$200,000toUS$1millionforgoodsandfromUS$2million

toUS$5million forworks.Greater relianceon the country’s

publicprocurementsystemandtheuseofhigherpriorreview

thresholds have led to the need for carrying out joint WB

andGPPB-TSOprocurementcapacityassessments forproject

implementingagencies.

�4.The procurement law as an anti-corruption measure.

Reforming the procurement system is a vital part of the

Government’s anti-corruption agenda, and the GPRA did

much to push that agenda forward. The procurement law

consolidatedamultiplicityoflawsandotherissuances,making

allprocurementmatterssubjecttoitanditsimplementingrules

andregulations.Thelawprovidesforpenaltiesandsanctions

–administrative,civil,andcriminal–againstpublicoffenders

whoarefoundguilty,andbidders,contractors,suppliers,and

consultingfirmsfoundguiltyofcorruptpracticeswillalsobe

subject to prosecution. The minimum penalty for a criminal

offense is six years inprison. The anti-corruption agencies –

OfficeoftheOmbudsman,PresidentialAnti-GraftCommission

(PAGC),andtheCommissiononAudit(COA)–haveusedthe

GPRAasabasis for investigationsandprosecutionsofsome

high-profile casesdiscussed inChapter2of thisReport (see

sectiononIntegrityandTransparency).

The Government Procurement Reform Act (RA 9184) or GPRA was passed by both houses of Congress, approved by the President on January 10, 2003, and became effective on January 26, 2003 (15 days after its publication in a newspaper of nationwide circulation).

�6

Further Challenges15.While the legal frameworkhasbeensatisfactorily setup

andharmonizationwiththedevelopmentpartners ismoving

forward, big challenges remain in implementation and

monitoringofcompliancewiththeprocurementlaw,including

the enforcement of anti-corruption measures. This CPAR

identifiesthechallenges,presentsrecommendations,andhas

generatedacontinuingdialogueonanactionplan tomove

towardsmakingmost,ifnotall,oftheprocuringentitiesGPRA

compliant.

�6.Allegations of procurement corruption.Afterfiveyears

ofimplementation,29percentofpeopleinterviewedintheSWS

surveyagreedthatcorruptioningovernmentcontractsisless

common,while37percentdisagreedand30percentremain

undecided (see Annex 4, Para. 3.4). Most recent corruption

perception surveys indicate that perception of corruption

in the Philippines remains very high. The recently published

Global Integrity Index2007ranks thecountryasweak,with

nochangefromlastyear.However,procurementisrankedas

strong, an indication of good procurement processes. Much

progress has been made in procurement reform in terms of

rulesandregulationsbutimplementationandenforcementare

stillweak,andtheobjectivesofthereformhavenotbeenfully

achieved.Thisscenarioisconsistentwithperceptionsofahigh

levelofcorruption inprocurementandwith theSWSsurvey

findingsthatonly13percentofthepublicisawareofthenew

procurementlawanditsintendedbenefits.

17. The CPAR team found that this low level of awareness

isdue to the fact that the lawhasnotbeencommunicated

properly to civil servants, theprivate sector, civil society and

other stakeholders. In particular, the private sector has not

beeninformedoftheprovisionsinthelawthatleveltheplaying

field andencourage competition.Both citizens andbusiness

community are the intended beneficiaries of procurement

reform,and thereforeneed tobewell-informedandvigilant

watchdogsparticipatingintheenforcementoftheprocurement

law.Howevergoodthenewpublicprocurementsystemunder

theGPRAis,likeanysystem,itcanfallpreytodeliberateabuse

through inappropriateuseofpower.By themselves, the law

andthenewprocurementsystemalonemaynotbesufficient

tocontrolgrandcorruption—thetheftoflargesumsbyhigh-

levelpoliticiansorofficials—andpolitical corruption—misuse

ofstatepowerbyofficialswhoshapetherulesofthegameto

benefit themand thosewhopay them—thatprevailedprior

to procurement reform, and that are reportedly continuing.

The successof procurement reformwill requiremeasures to

stimulatestrongpublicawarenessandsupportforit.

The CPAR Process

Objectives18. ThisCPARwasdesignedmainlytoassessthecurrentpublic

procurementsystemandgenerateadialoguetoimprovepublic

procurement practices and help civil society and the private

sector better understand these processes and procedures.

Anadditionalobjectivewastomeasureaccountability in the

expenditure of public funds through procurement and link

thisassessmenttotheparallelWBassessmentsofthesystems

for Public Expenditure Management and Public Financial

Management.

Scope19. The assessment covers the implementation of the

procurement law at all levels, from the national agencies,

regional and district offices, sub-national agencies, and

government-owned and controlled corporations, down to

localgovernmentunits,includingthebarangay.Italsocovers

the marketplace for public procurement, comprising private

sector bidders, suppliers, contractors, and consultants. The

effectivenessofcivilsociety’sparticipationwasalsoassessed.

Procurement transactions and contracts were reviewed and

analyzedfortheperiod2004to2006.

20.ThescopeoftheworkforthisCPARincludes:(a)areview

oftheeffectivenessofthepolicyandproceduralreforms;(b)

thedevelopmentanddesignofastrategyforthenationwide

implementationof tools tomonitorandmeasurethe impact

of the reform; (c) the assessment of the implementation

and enforcement of anti-corruption measures and the

recommendation of measures to strengthen them; (d) the

assessmentofthesustainabilityofcivilsocietyandprivatesector

participationinpublicprocurementandrecommendationsof

waystoimproveit;and(e)theassessmentoftheeffectiveness

of the GOP communication strategy and the suggestion of

recommendations to improve the public and international

perceptionoftheprocurementsystem.

Reforming the procurement system is a vital part of the Government’santi-corruption agenda, and the GPRA did much to push that agenda forward.

�7

21.Inthecourseofthereview,specialattentionwaspaidto

assessing the implementationandenforcementof theGPRA

and its Implementing Rules and Regulations Part A (IRR-A),

focusinglargelyon(i)anationaltrainingandprofessionalization

program; (ii) e-procurement and its linkage with electronic

budgeting and the new electronic government accounting

system; (iii) recordkeeping, monitoring and evaluation;

(iv) anti-corruption measures; (v) civil society and private

sector observers; and (vi) a strategic communication plan to

strengthencoalitionandbuildpublicsupport.Inlinewiththe

WBCASapproach, theassessmentclassified the impactson

threegroupsofstakeholders:nationaland localgovernment

entitiesandtheprivatesector.

Methodology22. Three Stages. The CPAR process was conducted in

three stages. First, the kick-off mission had the whole team

discussingandagreeingontheobjectives,scope,coveredareas,

methodologies, and approaches. The second stage involved

consultations with concerned groups and stakeholders, the

privatesector,anddevelopmentpartners,after the technical

consultantshadrecordedtheinitialfindingsandanalysis.The

thirdstagewasthefinalmissionwhichgenerateddialogueon

thedraftCPAR,usingtheindicator-basedreports,andachieved

consensusonhowtoconcretelyaddresstheweaknessesofthe

currentpublicprocurementsystem.Participantsintheprocess

arelistedinAnnex1.

23.OECD/DAC-WB Baseline and Performance Indicators.

ThePhilippineswasselectedasapilotcountryforthetesting

oftheBaselineIndicatorSystemandCompliancePerformance

IndicatorSystem(version4,July2006)developedbytheOECD-

DevelopmentAssistanceCommittee(DAC)–WBJointVenture

onProcurement.Thesystemisdividedintofour(4)pillarswith

twelve(12)indicatorsandfiftyfour(54)baselinesub-indicators.

Thescoringsystemrangesfrom3to0foreachbaselinesub-

indicator.Ascoreof3indicatesfullachievementofthestated

standard.Ascoreof2isgivenwhenthesystemexhibitsless

than full achievementandneeds some improvements in the

area being assessed. A score of 1 is for those areas where

substantiveworkisneededforthesystemtomeetthestandard.

A ratingof0 is the residual indicatinga failure tomeet the

proposed standard. In aggregating the scores to determine

theoverallcountryscore,theusercountryisallowedtodecide

ontheweightsusedtoaggregateatindicatorandpillarlevels.

TheGOPdecidedtoaggregatethescoresbyallocatingequal

weights for each pillar at 25 points and provided certain

weights for each sub-indicator and indicators depending on

thenationalprocurementfocusorstrategies.ThefullGOPBLI

reportisdisclosedintheOECDwebsite:www.oecd.org.

24. For this CPAR, the indicator level score is arrived at by

addingthescoresofsub-indicatorsanddividingthesumbythe

totalmaximumscores. The resultingpercentagedetermines

the level of achievement per indicator, and the percentage

levelsaregiventhefollowinginterpretation:thelowestlevelis

noneachieved(NA)forcompliancewithbaselinesfrom0-20

percent,thehighestisfullyachieved(FA)forcomplianceof81-

100percent,withtwolevelsinbetween:partiallyachieved(PA)

for21-60percent,andsubstantiallyachieved (SA) for61-80

percent.ThisCPARdecidednottofurtheraggregatethescores

tothepillarorcountrylevel.

25. FromFebruarythroughMay2007,theBLI-CPIassessment

methodology was introduced in a series of workshops that

comparedandvalidatedthefindingscomingfromtheearlier

focus group discussions, workshops and field work. The

validation process took four workshops for the GOP self-

assessment, and three workshops with the development

partners, civil society, and the private sector to validate the

self-assessment.

26. Agency Procurement Performance Indicator. The BLI

ispredominantlybasedonmacroindicatorsintendedtolook

at key elementsof apublic procurement system, and is not

intended to measure performance. It must be coupled with

a performance measurement tool to determine where to

make changes and what changes need to be made, based

oncollectionandanalysisofactualperformancedata.GPPB

therefore developed 28 Agency Procurement Performance

Indicators (APPI) that are related to the four pillars of the

The Philippines was selected as a pilot country for the testing of the Baseline Indicator System and Compliance Performance Indicator System (version 4, July 2006) developed by the OECD-Development Assistance Committee (DAC)–WB Joint Ventureon Procurement.

�8

BLI October 2004 version, in order to monitor and evaluate

actual implementation at the agency or micro level, linking

performanceatthetransactionalleveltotheelementsofthe

procurementsystematthemacrolevel.

27. Starting in 2006, the joint procurement capacity

assessment of implementing agencies for WB-assisted

projects had adopted the APPI as its main assessment tool.

To assess actual performance of the public procurement

system,theCPARusedtheAPPIsoftenentities:eightnational

governmentagencies—theDepartmentofPublicWorksand

Highways(DPWH),DepartmentofHealth(DOH),Department

ofEducation(DepEd),DepartmentofNationalDefense(DND),

ArmedForcesofthePhilippines(AFP),DepartmentofInterior

and Local Government (DILG), Department of Environment

and Natural Resources (DENR), and the Bureau of Internal

Revenue (BIR)—one Government-owned corporation, the

NationalPowerCorporation;andoneLocalGovernmentUnit

(LGU),theCityofMarikina.TheconsolidatedAPPIbecamethe

basisforassessingtheperformanceoftheprocuringentitiesin

the implementationoftheGPRA.Theresultsofthisexercise

aresummarizedinAnnex 3.

28. Public Perception Survey. Social Weather Stations

(SWS), a local survey firm, conducted surveys in November

andDecember2006,with20questionsaimedatassessingthe

public’sperceptionoftheeffectivenessofthenewprocurement

systemandhowitcouldcontributetocombatingprocurement

corruption.Theresultsofthesurveyshapedrelevantportions

ofthisreport,particularlyonStrategicCommunicationofthe

Reform.TheSWSsurveywascoordinatedbyTAFwithUSAID

funding,andthesurveyresultswerereleasedinFebruary2007.

Follow-upsurveystomonitorprogressinthepublicperception

willbeconductedinthefutureupdateoftheCPAR.Theresults

ofthe2006surveyaresummarizedinAnnex 4.

29. Procurement transactions and experts’ reviews.

A review of the Philippines’ procurement legal framework

was carried out from July to November 2006. Reviews of

procurementtransactionswerealsoundertakentoassessthe

impactof the law in thefield. These reviewswere followed

byfocusgroupdiscussionswithrelevantsectors,suchascivil

society organizations, the private sector, and the leagues of

barangays, municipalities, cities, and provinces. A team of

consultants also conducted assessments on the status and

effectivenessofthecommunicationstrategyforprocurement

reforms, the sustainability of civil society and private sector

participation in public procurement, the effectiveness of

the capacity-building and professionalization programs, the

enforcement of blacklisting and disqualification procedures,

andthestateofrecord-keeping,monitoring,decision-making

and control systems within procuring entities. Auditing and

legal/prosecutorial experts reviewed the effectiveness of the

anti-corruptionmeasuresoftheprocurementlawbymonitoring

the investigation and prosecution process in selected high-

profile procurement cases. The assessment highlighted the

strengthsandweaknessesofthosecaseshandledbyanti-graft

bodiessuchastheOmbudsman,PAGCandCOA.

30. Planning sessions were conducted with the leagues of

barangays,municipalities,citiesandprovinces,todiscussthe

initialfindingsoftheconsultantsonprocurementpracticesand

thestateofrecordsmanagementintheLocalGovernmentUnits

(LGUs).Workshopswerealsoconductedamongrepresentatives

from theGOP, civil society, and theprivate sector todiscuss

the state of their participation in procurement reforms and

activities and the statusandeffectivenessof communicating

the procurement reforms to the various stakeholders, and

todevelopa communications strategy that effectivelybuilds

awareness of the general public and generates increased

supportforthereforms.

31.Topromotee-procurement,anE-GovernmentProcurement

(E-GP)Missionwasfielded inNovember2006, todetermine

PhilGEPS acceptability for foreign-funded procurement and

possible linkages with other public financial management

systems such as the electronic budget and the electronic

NationalGovernmentAccountingSystem.

Links with Other Studies32. In parallel with the CPAR, the WB carried out an

assessmentoftheGOP’spublicfinancialmanagementsystem

using the Public Expenditure and Financial Accountability

(PEFA) framework. The PEFA methodology includes one

indicator, out of the total of 28, on public procurement,

which measures the extent to which competitive bidding

is used for public procurement above a specified minimum

threshold and the adequacy of justification provided when

competitivebidding is notused. PEFA is not intended tobe

a comprehensive assessment of the public procurement

system,but ratheranapproach forperformanceassessment

inpublicfinancialmanagementingeneral.Assuch,itshould

beseenasacomplementtotheCPARforthoseinterestedin

gaininga senseof theoverallqualityof thecountry’spublic

financialmanagement system. The PEFA review is presented

inthePEFA,PublicFinancialManagementPerformanceReport

and Performance Indicators where procurement garnered a

satisfactorypassingscoreofB+.

�9

Bringing Justice to the Least PrivilegedThree 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

Pillar I: Legislative and RegulatoryFramework

33.Thispillarlooksatthelawsgoverningpublicprocurement

andattheimplementingrulesandregulations.Graph1shows

the BLI assessment result for this procurement pillar, based

on two indicators: (1) legal framework, where international

standards are found to be substantially achieved; and, (2)

implementing regulations and documentation, where the

existingsystemisfoundtofullyachievethestandards.

Procurement Legislative Framework

Findings 34. Governance Structure. The Philippines is a democratic

and republican state that, under the 1987 Constitution,

adoptedthecentralizedpresidentialformofgovernment.The

powersofgovernmentareexercisedbythreeindependentand

co-equal branches: (a) the Executive Branch, which enforces

thelawsandisheadedbyanelectedPresidentforatermof

six years; (b) the Legislative Branch, which promulgates the

laws and is vested in a bicameral Congress consisting of a

Senate and a House of Representatives; and (c) the Judicial

Branch,whichsettlesdisputes involvingrightsofcontending

partiesunderthelaw,andisvestedintheSupremeCourt,an

appellatecourt,andotherlowerandspecialcourts.

35.Therearefourindependentconstitutionalbodiesthatare

directly accountable to the people and not beholden to the

threebranchesofgovernment:(a)theCivilServiceCommission,

which oversees the civilian bureaucracy; (b) the Commission

on Election, which administers the electoral process; (c) the

Commission on Audit, which audits government accounts;

and(d)theOfficeoftheOmbudsman,whichinvestigatesand

prosecutesgraftandcorruptioncasesinvolvingcivilservants.

36. Within this governance structure, the management and

operationofthepublicprocurementsystemisafunctionofthe

ExecutiveBranch,becauseitisamechanismfortheacquisition

ofgoods,works,andservicesthatenabletheGovernmentto

deliverpublicservices.

II. FINDINGS, ASSESSMENTS AND RECOMMENDATIONS

37. Legal System and Hierarchy of Issuances. The

Philippine legal system is primarily civil law, with a written

Constitutionandabodyoflegislatedstatutesastheprincipal

sourcesoflaw.However,commonlawinfluenceistraceablein

somecommercialandprocedural lawsderivedfromUSlegal

institutions.Also, theShari’ah legal system is recognized for

Muslimsandenforced intheAutonomousRegion inMuslim

Mindanao.

38. In terms of the hierarchy of legal issuances, the 1987

Constitution is the supreme lawof the land, andno lawor

issuancecanruncountertoit.Atthesecondlevelarethelaws

passedbyCongressorthoseissuedbythePresidentduringthe

fewoccasionsthatthePresidentexercisedlaw-makingpower,

followed by a third level of executive orders issued by the

President,whichhavetheforceoflawaslongastheydonot

violatethelawspassedbyCongressandtheConstitution.At

thefourthlevelareadministrativeordersissuedbygovernment

agenciesandordinancesissuedbyLGUs,whichhavelocalized

and limited coverage and effectiveness but may not violate

theConstitution,lawspassedbyCongress,ortosomeextent

ExecutiveOrdersissuedbythePresident.

SCOREMAX. SCORE

Graph 1 - Legal and Regulatory Framework

�0

0Pillar 1 Legislative and Regulatory Framework

Indicator 1 Legislative and Regulatory Provisions

Indicator 2 Existence of ImplementingRules

20

30

40

50

3642

18

24

18 18

2�

39. The Government Procurement Reform Act. The

GPRAcoversallprocurementofthenationalgovernment,its

departments,bureaus,officesandagencies, includingSUCs,

Government Owned and Controlled Corporations (GOCCs),

Government Financial Institutions (GFIs), and LGUs. The full

text of the law is posted on the GPPB website (www.gppb.

gov.ph).The lawmaynotberevised,amended,or repealed,

except through Congress. It has been cited and applied by

theSupremeCourtinanumberofcases.Figure2showsthe

hierarchyoflawsandissuancesintheGOPProcurementReform

Framework,theircoverage,andareasforharmonizationwith

donors.

40. Coverage and Principles of the GPRA.Thelawadopts

thefollowingprinciples:

•Transparency in the procurement process and in theimplementationofprocurementcontracts;

•Competitivenessbyextendingequalopportunitytoenableprivatecontractingpartieswhoareeligibleandqualifiedtoparticipateinpublicbidding;

•A streamlined procurement process applicable to allgovernmentprocurement,simpleandadaptabletoadvancesinmoderntechnology;

•System accountability, whereby both the public officialsdirectly or indirectly involved in procurement and in theimplementationofcontractsaswellastheprivatepartiesthatdealwithgovernmentare,whenwarrantedbycircumstances,investigatedandheldliablefortheiractions;and

•Public monitoring of the procurement process and theimplementation of awarded contracts to make sure thatthese contracts are awarded lawfully and are undertakenstrictlyaccordingtospecifications.

Figure 2. GOP Procurement Reform Framework

.

Implementing Rulesand Regulations

World Bank, ADB,JBIC Guidelines

World Bank, ADB,JBIC Guidelines

Generic ProcurementManuals

Harmonization

Bidding Documents

GovernmentProcurement PolicyBoard (GPPB)

Technical SupportOffice (TSO)

Oper

atio

nsOv

ersi

ght

Lega

l Fra

mew

orks

Commission on AuditOmbudsman / Presidential Anti-Graft Commission

22

External AuditInvestigationand Reports

Reports and Complaints

Reports and Complaints

Trainings and Info.Campaigns APPI and OMES

- Heads of ProcuringEntities

- Bids and AwardsCommittees (BAC)

- Technical WorkingGroups

- BAC Secretariat- Budget and

Supply Officers- End users

- Local ChiefExecutives

- Bids and AwardsCommittees (BAC)

- Technical WorkingGroups

- BAC Secretariat- Budget and

Supply Officers- End users

s

41. Procurement Reform Measures.Thelawisconsidered

a good procurement law because it incorporates almost

all attributes of a good public procurement system. These

include:

(a)linkingprocurementwithpublicfinancialmanagementby

incorporatingannualprocurementplansinthebudgeting

system;

(b) modernization through the adoption of electronic

government procurement (PhilGEPS) and mandating its

use;

(c) requiring competitive bidding as the primary mode of

procurement;

(d) prescribing a balanced procurement organization in all

procuringentitiesthroughtheBidandAwardsCommittee,

chairedbyatleastathird-rankingpermanentofficial;

(e)reducingopportunitiesforcorruptionby

(i) prohibitingtheheadoftheprocuringentityfrombeing

amemberofthecommittee,

(ii)prescribing rules on fraud and corruption in the

InstructiontoBiddersandStandardContractForms,

(iii)requiringdisclosureofrelationsbythebidderthrough

a sworn affidavit that no officer of the corporation

is related to the Head of the Procuring Entity by

consanguinityoraffinityuptothethirdcivildegree,

(iv) inclusion of penal clauses, civil liabilities, and

administrativesanctionsagainstviolatorsofthelaw,

(v)provisionoflegalassistancefor,andindemnificationof,

BidsandAwardsCommittee(BAC)memberswhoare

subjectedtoharassment;and

(vi)requiringcivilsocietyorganizationsorNGOstoobserve

thebiddingprocess;

(f) facilitatingtheprocessthroughtheissuanceandmandatory

useofstandardbiddingdocumentsandforms,andgeneric

procurementmanuals;

(g)providingavenuesfortransparencybymeansofaclearly

definedprotestmechanismandprocedures;

(h) streamlining contract implementation and settlement of

disputes;and

(i) creationofanoversightandnormativebodymandatedto

protectthenationalinterestinallmattersaffectingpublic

procurement, with due regard for the country’s regional

andinternationalobligations.

42. Procurement methods. The GPRA provides for public

bidding as the primary mode of procurement and defines

thecircumstancesandcriteriabywhichmethodsother than

publicbiddingmaybeusedbytheprocuringentity.However,

the GPRA does not specify the appropriate standards for

international competitive tendering. It simply acknowledges,

under its Section 4, that the procurement rules agreed in

treaties and in international or executive agreements (such

as donor loan and grant agreements) should be respected.

While the procurement principles governing the Philippine

procurement system and those of the multilaterals are the

same,thisisnotthecaseforotherdevelopmentpartners;the

Government is concerned that there are some development

partners, particularly bilateral ones, that are not following

opencompetitivebiddingprinciplesofprocurement. It is for

this reasonthat theGovernment ispursuingthepreparation

and issuance of an Implementing Rules and Regulations–B

(IRR-B)toprescribeappropriateimplementingrulesforforeign-

funded contracts.At theApril 2008PhilippineDevelopment

Forum,thedevelopmentpartnersagreedtoprepareIRR-Bto

institutionalizetheharmonizationofdocumentsandmanuals

andattaineffectiveimplementationofthenewprocurement

systematthenationalandLGUlevels.TheWBwillleadthiseffort

on behalf of the development partners. Recommendation:To provide guidance in the implementation of international competitive tendering, Implementing Rules and Regulations B (IRR-B) should be drafted and issued, as provided for in Section 1 of IRR-A: “[T]he IRR-B for foreign funded procurement activities shall be subject of a subsequent issuance.” The proposed CPAR Action Plan includes the drafting, finalization and issuance of IRR-B.

43. Advertising rules and time limits. TheGPRA requires

that public advertisement and posting of bid opportunities

for competitive bidding and for procurement done through

alternativemethods.Theleadtimesfortheadvertisementupto

thebidsubmissionareprovidedforintheimplementingrules.

For foreign-funded international competitive bidding (ICB),

theGPRArequiresthattheMDB’sProcurementGuidelinesbe

followed. However, the law does not provide for extension

of thetimeframeswhen internationalcompetition issought.

Recommendation: The proposed IRR-B should include a provision for appropriate timelines for international bidding to encourage the participation of foreign bidders.

44.Rules on Participation.TheGPRAprovides for fairness

and transparency in public bidding rules as indicated in the

Instruction to Bidders. However, it does not provide specific

rulesfortheparticipationofGOCCsorstate-ownedenterprises

in public bidding that would promote fair competition and

encourage legitimate private enterprises to bid. The entry

of a GOCC bidder would cast doubt on the fairness of the

process that would undermine competition. Consequently,

theprocuringentitywouldoftenresorttodirectpurchaseor

negotiationwiththeGOCC,whichisallowedundertheGPRA.

Recommendation:To promote fairness in public bidding, the implementing rules and regulations should include specific rules when a GOCC participates as a bidder.

45.Complaint and Protest Mechanisms.TheGPRAandits

IRR-Aclearlydefinetheprotestmechanism.Allcomplaintsbya

bidderarefiledwiththeprocuringentity’sBAC,whichistasked

toresolveitinthefirstinstance.Shouldbiddersnotbesatisfied,

theymaythenfileanappealwiththeheadoftheprocuring

entity,intheformofaverifiedprotestanduponpaymentof

23

anon-refundableprotestfee.However,noindependentthird-

party review body is designated to resolve the complaint or

protest. Furthermore, the IRR-A sets the protest fee as one

percent of the approved budget for the contract. Based on

theexperiencesofthenineAPPIpilotagenciesandonepilot

LGU,therearehardlyanyprotestsfromthebidders,because

of the restrictive provisions on protests and the lack of an

independentreviewbody.Whileanappealfromthedecision

oftheHeadoftheProcurementEntitymaybefiledwiththe

office of the President or the judicial courts, these are not

independentadministrative reviewbodiesas requiredby the

standards.Recommendation:A study should be conducted on how the appeals mechanism could be strengthened based on the requirements of the law and international standards.The Study should aim to find ways of making the protest mechanism a tool for upholding the integrity of the bidding process.

Results of BLI Assessment46. The above findings are reflected in the BLI assessment.

Indicator1garneredascoreof18percentoutofapossible

24 points for a 75 percent compliance level, indicating that

thelegislativeframeworksubstantiallyachievesthestandards

agreedupon.Thelegislativeframeworkisadequatelyrecorded

andorganized,thelawiscomprehensiveenoughtocoverall

typesofprocurementusingthenationalbudget,anditdefines

and provides for allowable procurement methods. The legal

framework also provides for public bidding as the default

procurementmethodandclearlysetsouttheproceduresand

timelimitsforthismethod.Table2providesasummaryofthe

ratingsfortheassessmentofthisindicator.

Implementing Regulationsand Documentation

Findings47. Implementing Rules and Regulations. The

Implementing Rules and Regulations Part A (IRR-A) of the

GPRA,whichprovides specificguidelinesandprocedures for

theprocurementofgoods,works,andconsultingservicesthat

arefullyfundedbytheGovernment,wasjointlyformulatedby

theGPPBandthe JointCongressionalOversightCommittee.

Both bodies then endorsed the IRR-A to the President, who

officiallysignedandissueditonSeptember18,2003,under

AdministrativeOrderNo.119.TheIRR-Aamplifiesandclearly

discusses each provision of the GPRA, from procurement

planning, procurement organizations and responsibilities,

bidding documents and forms, protests and appeals, to

procurementmethodsandalternativemethods,procurement

procedures, contract implementation, dispute resolution,

liabilities, and sanctions and penalties against violators.

AlthoughIRR-Adoesnotapplytoprocurementunderforeign-

assistedprojects,whichwillbecoveredinafutureIRR-B,itis

applied as a supplement to the procurement guidelines and

the loan or grant agreements of the development partners,

wheneverthesearesilentonspecificareasorprocedures.

48. The Philippine Bidding Documents. The PBDs are

standarddocumentsusedforprocurementthroughcompetitive

biddingthatsettherulesofthebiddingprocessandarebinding

onallparticipatingparties,thatis,theprocuremententityor

buyerand thebidders from theprivate sector. ThePBDs for

works,goods,andconsultingservices include instructions to

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. Score1(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 24Rating: 18/24 or 75%;Level of Achievement is Substantially Achieved (SA)

24

implementingNationalCompetitiveBidding(NCB)forforeign-

assistedprojects.However, since regional anddistrict offices

andLGUshavefoundthePBDstobetoocomprehensiveand

tediousforsmalllocalprocurements,simplifiedPBDsforsmall

procurementsuptocertainthresholdsarebeingdevelopedby

theGPPB.

49.The Generic Procurement Manuals.TheGPMsexplain

the steps of the procurement process within a procuring

entity and serve as user guides for practitioners. The GPMs

alsodefine the roles and responsibilitiesof theprocurement

organizations,thetechnicalworkinggroups,theprivatesector,

andcivilsocietyobservers.Therearefourvolumes,oneeach

onsystemsandorganization,goodsandservices,infrastructure

projects, and consulting services. Government agencies are

allowedtocustomizeandmodifytheGPMstosuittheirneeds,

subjecttotheapprovaloftheGPPB,andprovidingthechanges

remainconsistentwithexistingprocurement laws,rules,and

regulations. Like thePBDs, the fourGPMswereharmonized

in July2006with themanualsusedbyADB, JBIC, andWB.

While theGPMsprovideaholistic approach toprocurement

inallagencies,LGUsareunderstandablyconcernedthatthey

may not always be appropriate for small LGUs. The GPPB’s

challengeistoaddressthisconcern.Recommendation:GPPB should develop simpler bidding documents and procurement manuals for small users, especially LGUs, barangays, and people’s organizations and communities.

Results of BLI Assessment50. The above findings are reflected in the BLI assessment.

Indicator2garneredaperfectscoreof100percentduetothe

existenceof implementingregulationsanddocumentationin

the legalandregulatoryframeworkthathavebeenassessed

to have met all the baseline elements of a good public

procurementsystem.Theregulatoryframeworkisadequately

recorded and organized, it implements and complements

the law, and provides standard documentation and generic

manuals thatareaccessible to thepublic.Table3providesa

summaryoftheratingsforthisassessment.

Pillar II: Institutional Framework and Management Capacity

51.PillarII looksathowtheprocurementsystemoperatesin

practice through the institutions and management systems

thatarepartoftheoverallpublicsectorgovernance.Graph2

showstheBLIscoresforthethreeindicatorswhichconfirmthe

followingfindingsastotheirlevelsofachievement:

(3)linkagestoPFMsystems:Thepublicprocurementisfound

nottobefullymainstreamedorintegratedintothepublic

financialmanagementsystem.

(4)managementcapacity:Thecountry’sfunctionalnormative/

regulatory body, the GPPB, substantially achieves the

baselines.

(5)institutionaldevelopmentcapacity:Theexistingmonitoring

systemsarefoundtobeinadequatetomonitorperformance

andcollectanddisseminateprocurementinformation,and

thequalityoftrainingprogramsneedstobeimproved.

Table 3: Summary of Scores for Indicator 2, Pillar I

Sub-Indicators Score Max. Score2(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 �8Rating: 100%; Level of Achievement is Fully Achieved (FA).

SCOREMAX. SCORE

Graph 2 - Institutional Framework and Management Capacity

0Pillar IIInstitutionalFramework andManagementCapacity

Indicator 3Public SectorGovernance

Indicator 4FunctionalNormativeBody

20

30

40

25

36

912 11 12

5

12

Indicator 5Existence of Institutional

�0

25

Linkages of Public FinancialManagement Systems

Findings52. Linkage of Annual Procurement Plans to the Budgetary Process.Procurementplansaremandatedbylawtobeoneof

thebasesforthepreparationoftheproposedannualbudget

submittedtoCongress.Everyyear,procuringentitiesprepare

their annual operatingplans andbudget for the succeeding

calendar year.While theseproposals are supposed to reflect

the thrust of national government and agency policies and

programs,andidentifytheresourcesrequiredtodeliverpublic

services, in practice procuring entities prepare the APPs in

a spirit of compliance and do not take advantage of their

potential as a tool to improve theprocurementprocess and

monitoritsefficiency.Nordomostagenciespreparemulti-year

plansthatare linkedtotheannualbudgetprocessortothe

preparationofAPP, and someNGAs and LGUsdonot even

prepare or consolidate an APP. Recommendation: GPPB needs to monitor the required submission of the APP and the PPMP, which are important internal financial and expenditure control mechanisms mandated by law, in order to ensure full compliance. The provision to revise the APP should be evaluated in light of abuses by some agencies. Clear guidelines should be developed for multi-year contracts that will integrate budgeting, expenditure and procurement programming.

53. Budget Before Bidding.Since thebudgetcontains the

initial list of projects to be procured and the corresponding

budgetary requirement, as soon as the national budget is

approved by Congress, the procuring entities can refine

theirannualprocurementplans toconform to theapproved

allocations before expenses are committed. Before the

procurementprocessbegins,theinclusionoftherequirements

in thebudget is checkedby theprocuringentity. TheGPRA

requiresanapprovedbudgetforthecontractbeforestarting

theprocurementprocess.Moreover,acertificationofavailability

of funds is required to be appended to the contract, as an

internal control point to ensure that funds are appropriated

andavailable.Reviewsoftransactionsshowthattheprocuring

entitieshavebeencomplyingwiththis rule.However,delays

in the payment of suppliers and contractors is a perennial

concern. Therearenobusiness standards for theprocessing

of invoicesbyNGAsandLGUsthatmeettheobligationsfor

timely payment stated in the contract. Recommendation: Business standards for the processing of invoices for timely payment need to be developed in tandem with a generic financial management manual that covers procurement and logistics processes. The procurement system needs to be fully integrated with the budgetary and financial systems, in order to provide information on the completion of major contracts.

Results of the BLI Assessment54.The above findings are reflected in the assessment.Indicator 3 garnered a score of 9 percent out of a possible

12 points or 75 percent compliance, because the public

procurementsystemismainstreamedandintegratedintothe

public sector governance system. However, compliance with

therequirementtoprepareanAPPisuneven,andthelinkage

between the budget process and procurement planning is

weak(nomulti-yearplans).Table4providesasummaryofthe

BLIassessment.

Management Capacity

Findings55. Normative/Regulatory Body: The Government

ProcurementPolicyBoard.ThecreationoftheGPPBinJanuary

2003 was a major milestone in the implementation of the

GPRA.GPPBisapolicy-makingandmonitoringbodyforpublic

Table 4: Summary of Scores for Indicator 3, Pillar II

Sub-Indicators Score Max. Score3(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 �2Rating: 9/12 or 75%; Level of Achievement is Substantially Achieved.

The creation of the GPPB in January 2003 was a major milestone in the implementation of the GPRA.

26

procurementempoweredtoformulateandamendtheIRRand

relevant forms, toensure thatprocuremententities regularly

conductprocurementtrainingprograms,toprepareoperations

manuals,andtoconductannualreviewsoftheeffectivenessof

theGPRAandrecommendamendments. It isaninteragency

bodycomposedoftop-levelofficialsfrom12keylineagencies

tasked to formulate and issue policies and regulations on

procurement.TheBoardischairedbythecabinet’seconomic

managers—the Secretary of the Department of Budget and

Management, and the Director General of the National

Economic Development Authority as alternate chair—with

a representative fromtheprivate sectorasavotingmember

and observers from anticorruption bodies. The GPPB meets

regularlyat leastonceamonth, followingagendaset in the

monthly meetings of its Technical Working Group (TWG),

whichalsopreliminarilydeliberatesontheissuesandprepares

policyrecommendations.

56. In its short existence, the GPPB has quickly become

effective in performing its functions as mandated by law. It

hasissuedseveralcircularsandresolutionsinpursuanceofits

mandate,publishedontheGPPBwebsite(www.gppb.org.ph),

and has been recognized both locally and internationally as

awell-functioninginteragencypolicy-makingbody.Itssuccess

may be attributed to its multi-faceted structure that allows

feedbackdirectlyfromthestakeholders.

57. Organizational, Technical and Funding Support.The GPPB is ably assisted by its Technical Support Office

(TSO),arelativelysmallofficethathasquiteanotablelineof

accomplishments.Inparticular,theTSOHelpDeskhasgained

strongsupportfrommanyprocurementpractitioners,whorely

onitasoneofthemostpopularandeasilyaccessiblesources

of procurement information. Since its 2003 launch, it has

accommodatedmorethan4,821phonequeriesand404walk-

in queries frombothgovernment andprivate organizations,

andissued291writtennon-policyopinions,32writtenpolicy

opinions, and 72 resolutions. However, the GPPB-TSO lacks

sufficientfinancial support from thenationalgovernment. It

isdependent for fundingon theProcurementService (PS),a

separateentityfullyownedbytheGovernmentthatismandated

toprocurecommonlyusedofficesuppliesandequipment.The

demand for TSO to perform the full mandate of the GPRA

isan issue,becauseof theneedtoexpand itscoverageand

staffingsoitcanperformitsothermandatedfunctions,such

asmonitoring,enforcementandpublicrelationsandstrategic

communications.Recommendations:The GPPP-TSO should be provided with sufficient financial resources to perform the full range of its function under the GPRA. Its ability to monitor the implementation of procurement-related laws should be strengthened by creating a monitoring and enforcement group and a public relations and strategic communications unit.

Results of the BLI Assessment58.ThecreationandsuccessfuloperationoftheGPPBanditsTSOarereflectedinthepositivefindingsoftheBLIassessment.Indicator 4 scored 92 percent because there is a functionalnormativebodyforprocurementthatisempoweredbylawtoprotectnationalinterestinallmattersrelatedtoprocurement.Itisanindependentboardthathastheauthoritytopromulgaterulestoimplementthelaw.Table5providesasummaryofthefindingsforthisassessment.

Institutional Development Capacity

Findings59. Collection and dissemination of Procurement Information: PhilGEPS. The PhilGEPS is the country’s newelectronic system for government procurement, a single,centralized electronic portal to be used by all governmentagencies in the procurement of commonly-used goods. Italsoservesasacentralportalprovidingtheprimarysourceofinformationontheprocurementofothergoodsandgeneralsupportservices,civilworks,andconsultingservices,includingpolicies,regulations,issuances,andcontractawards.Launched

Table 5: Summary of Scores for Indicator 4, Pillar II

Sub-Indicators Score Max. Score4(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 12Rating: 11/12 or 92%; Level of Achievement is Fully Achieved.

27

in August 2006, it replaced a pilot electronic procurement

systemandoffersmore functionality forbetter transparency

andefficiency.Afive-year,US$5millioncontractwas signed

with a private service provider in charge of operating the

PhilGEPSanddevelopingadditionalfunctionalities.Adetailed

descriptionofPhilGEPSmaybefoundonthePhilGEPSwebsite

(www.philgeps.net).

60. Currently, PhilGEPS provides the following features and

functions:(a)ElectronicBulletinBoard:Postingofprocurement

opportunities, notices of awards, electronic distribution of

bid documents and automatic notification of bid notices

and amendments; (b) Supplier/Subscriber Registry: Registry

of government agencies and all government suppliers,

contractors and consultants; and (c) Electronic Catalogue:

A price list of common-use goods, supplies, materials and

equipment which are to be purchased from a centralized

procurement system being implemented by Procurement

Services. Phase2developmentplanswill introduce aVirtual

Storeforgovernmentagenciesnationwidetoobtaincommon-

useitems.Tofacilitatepayments,anelectronicpaymentfacility

willbedeveloped, includingprovisionsforelectronictransfer

of funds. The Government will introduce charges and fees

aimedatmakingthesystemfinanciallyself-sustaining.Lastly,

thesystem’sfunctionalitywillbeexpandedtosupportonline

procurement of both common and non-common use items,

andtoallowsupportofElectronicBidSubmissionandthefull

implementationofe-bidsubmissionprocesses.

61. Initial indications are that PhilGEPS provides significant

benefits to Government and suppliers. It is a major tool for

implementing government procurement policy, and has

established an open, transparent, efficient and competitive

marketplace for government procurement, allowing

Governmenttoobtainbetterpricesanddocumentaudittrails

(reports on government purchases and winning bidders).

It provides suppliers easy access to government tenders

24/7, electronicdocuments fordownloading, andautomatic

notification of bid notices and supplements. It reduces

suppliers’transportationandtimecostsandallowsthemtodo

marketresearchongovernmentprocurement.

62. As of July 31, 2007, PhilGEPS had achieved significant

compliance:85percentofNGAsand79percentofgovernment

entities overall had registered (excluding barangays, which

are allowed by law to procure through a municipal or city

government).Morethan6,000agenciesand22,000suppliers

had registered, and more than 380,000 notices and 58,000

awardshadbeenposted.Thelevelofcompliancebyprocuring

entitiesasofJuly31,2007isshowninTable6:

63.However,currently,thePhilGEPSprovidesonlyinformation

onsomeofthecontractawardsanditsacceptabilityislimited.

Moreover, its data has not been verified by audit and so

far, there has been no analysis of procurement information.

Recommendations: GPPB should monitor compliance by

procuring entities on the use of PhilGEPS. The Procurement

Service(PS)shoulddevelopPhilGEPS’Phases2to5.Moreover,

thePSshouldengagetheservicesoftheCommissiononAudit

to verify the system, and a periodic analysis of information

shouldbeincludedaspartoftheaudit.

64. PhilGEPS Acceptability to Donors. An assessment of

PhilGEPS’acceptabilityforprojectsbyMDBswasconductedin

November2006.TheassessmentfoundthattheWBandADB

arereadytoacceptthePhilGEPSforapplicationonADB-and

WB-fundedNCBandshoppingprocedures,subjectonlytofive

modifications:

• ForMDB-fundedprojects,waivethePhilGEPSrequirement

thattheentryoftheApprovedBudgetCeiling(ABC)field

bemandatory.

• Includearule-basedapproachtovalidatethedurationof

theprocurementnoticeperiod,sothatPhilGEPSwould

notallowthepublicationofthetendernoticesubmittedby

aprocuringentityattemptingtoadvertiseatenderfora

periodoftimeshorterthanthatrequiredbyGPRA.

• Includearule-basedapproachfortheMDBShopping

thresholdofUSD$100,000.

•Allowtheoptionsofdownloadingofbiddingdocuments

electronicallyandincludeamailingoptionuponthe

requestofthebidder.

•Allowthedownloadingbybuyingagenciesoftheorder

requestformthePhilGEPSwebsite.

Government Procuring Entities Total Number Total Registered Level of Compliance

NationalGovernmentAgencies(NGA’s) 1,702 1,456 85.55%GovernmentOwnandControlledCorporations(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%

Table 6: PhilGEPS Compliance

28

Thesystemdevelopmentworkrequiredtoaddresstheshort-

termacceptability requirementswascompleted inNovember

2007,andsixpilotagencies(DPWH,DOH,DepEd,DA,DENR,

andtheLocalWaterUtilitiesAdministration)havebegunusing

theenhancedsystemforthepostingofbidandawardsnotices

associatedwithWBandADBfunding.Long-termrequirements

will beaddressedwith the implementationofnewPhilGEPS

featuresforvirtualstore,chargesandfees,e-paymentande-

biddingbeginningin2009.

65. National Procurement Statistics:TheOnlineMonitoring

and Evaluation System. In November 2006, GPPB’s TSO

launchedthePhilippines’firstweb-basedpublicprocurement

monitoring tool, OMES. The OMES is designed to function

as a self-help tool for government agencies that wish to

identify their own strengths and weaknesses in the field of

procurement.ItalsoprovidesGPPBwithimmediatefeedback

on reform impactandwithsignalspointing tospecificareas

whereanagencymayrequiretechnicalassistanceandguidance

orwhereamendmentstothelawandtheIRRmaybeneeded.

Thesystemoffersthreeonlinesurveyforms:theAPPISurvey,

theGPPB-TSOSurvey,andtheSavingsMonitor,whichevaluate

different aspects of an agency’s compliance with GPRA and

IRR-A. Inthefirsteightmonths,185agenciesregisteredand

130 of these completed the Agency Performance Indicators

(API) and the GPPB-TSO surveys. Although enhancements

willbeneededtoperfecttheOMES,theGovernmentisvery

optimisticthatitisontherighttrack.

66. The Agency Procurement Performance Indicators.The APPI is a micro-level procurement system evaluation

tool designed to monitor the performance of an agency’s

procurement system based on the four key pillars using 28

indicators(seeCPARMethodologysectioninpreviouschapter).

GPPBselectedtenprocuringentitiestopilottheAPPIin2005-

2006,basedonthevolumeofprocurementtransactions,with

thesupportoftheWB,becausemostoftheagenciesselected

are implementing WB-financed projects. The performance

evaluationresultswerevalidatedandagreedwitheachagency,

togetherwith theoversightagencies,privatesectorandcivil

societyorganization(CSO)representatives.Sincethen,dueto

itseffectiveness,ithasbeenaddedasatoolforprocurement

capacity assessments of agencies implementing WB-assisted

projects,therebymakingtheAPPIajointWB-GOPassessment

tool. In summary, the keyAPPI findings for the ten selected

agenciesareasfollows:•The10pilotprocuringentitiesareadoptingtheGPRA anditsIRR-Ainternallythroughtheissuanceofcirculars ordepartmentorders.Theprocuringentitiesaretherefore familiarwiththelawandtheyaremakingsurethatitis implemented.•Mostentitiesarenotcomplyingwiththenationaltraining policy.Thetrainingprogramisthereforeweakandmustbe strengthened.

•Almostallprocuringentities(92percent)haveestablished theirorganizationalprocurementunitsandaretherefore compliantwiththeprocurementorganizational requirement.•Sixof10procuringentitiesusedpublicbiddinginmore than90percentofthetotalvalueofcontractsintheir APPs.GPPBshouldbestrictlyenforcingthecompetitive biddingrequirementforallnotincompliance.• Onlyoneoutof10procuringentitieshadatleastfive biddersineachbiddingprocess,signifyingthatcompetition isweak.•All10procuringentitiescomplywiththerequiredtimefor bidders’preparationofbids,whichgivesbiddersenough timetoprepareproperbids.•Sevenoutof10procuringentitiesdidnotcomplywiththe transparencyrequirementtoposttheawardofcontracts onthePhilGEPSwebsite.

67. The National Training Program.TheGPRArequiresthe

GPPBtoestablisharegulartrainingprogramtoprofessionalize

and improve the skills of government procurement officers

and employees, who are required to avail themselves of

this training. In line with this policy, and in response to the

increasing demand for training on GPRA, GPPB’s strategy is

designed to address the training needs of all government

agenciesnationwide.GPPB-TSOdevelopedaseriesoftraining

programs,whichinclude:(a)basictrainingontheGPRAand

thePBDsforLGUs,NGAs,GOCCs,andSUCs;(b)thetraining

oftrainers,andarefreshercourseontheGPRAandthePBDs

fortrainersandresourcepersons;and(c)specializedtraining

coursesonvalueengineeringandfrauddetectionforselected

participants.

68. InMarch2004,theGPPBconductedthefirstTrainingof

TrainerssessionforrepresentativesfromDBM,COA,DILG,and

thePhilippineLeagueofLocalBudgetOfficers.Subsequently,

regional composite teamsof trainerswere formed,with the

DBMasleadagency.TheLocalGovernmentAcademyisalso

involvedattheLGUlevel.InOctober2005,theGPPBformed

partnerships with selected state SUCs in order to augment

the number of trainers and conduct training for NGAs and

GOCCs.AsofMarch2007,19percentofthesenational-level

entities,andmorethan80percentofLGUs,hadatleastone

representativetrainedonthecontentoftheGPRAandinthe

useofPBDs;3percentofnationalentitiesand15percentof

LGUshadatleastonerepresentativetrainedintheuseofthe

GenericProcurementManuals(GPMs).

69.However,thetrainingprogramshavenotyetachievedtheir

intendedimpact,otherthanthatofinformationsharing,and

appeartobedesignedtoinformratherthantomeetspecific

competencyrequirements.Theselectedcomposite teamand

SUC trainers either lacked the appropriate training skills or

the technical expertise/experience to discuss procurement in

detail.AnassessmentoftheTrainingofTrainersandRefresher

29

Coursesrevealsthatthemodulesandmaterialsfocusonlyon

the technical provisions of the law, and thus lack substance

thatwouldfocusonbuildingthecapacitiesoftheseindividuals

astrainers,suchasskill-buildingsessionsonhowtomanage

the learning process. Only 64 percent of attendees believed

that the resource speakers chosen were proficient in the

subject matter. The GPPB is aware of the problem and has

conductedseveralvalidationworkshops,however,eventhese

workshopshavenotbeeneffectiveinaccuratelyidentifyingand

addressingissueswiththecapabilityofthelecturersastrainers

andpresenters.Anotherareaofweaknessidentifiedisthelack

ofqualityevaluationmechanismtomeasureimprovementsin

thecapabilityoftheprocurementstaffasaresultoftraining.

Recommendation: The national training program should be reviewed, revised, and reissued in line with the strategic communication plan in order to ensure a change in behavior of the current crop of procurement practitioners. The private sector should also be included in the training program in order to improve competitiveness.

70. Professionalization Program.In2006,GPPBlaunchedasignificantprofessionalizationinitiative,intendedtoprovideacareerpathforprocurementpractitionersintheGovernmentandcorrectweaknessesincapacitybuildingidentifiedinthe2004CPARexercise.SupportedbyaWBInstitutionalDevelopmentFund(IDF)TrustFund,theformaltraininginvolvesafour-stagecertificationprogramthatwillraisethelevelofefficiencyandeffectivenessofpublicsectorprocurement.Inthecurrentphaseoftheproject,15modularsyllabiandstudymaterialsarebeingdevelopedbyaconsultingfirm,whichwilltrainlecturersfromselectedSUCsandregionalcompositeteamsinthedeliveryofthemodules.UndertheGPRA,aBidsandAwardsCommittee(BAC), BAC Secretariat, BAC TWG and Procurement Unitare tobecreated ineachgovernmententity tofacilitate theprofessionalizationofprocurement.Headsofprocuringentitiesaretoconsiderprocurementproficiencyasoneofthefactorsin the designation of officials to the BAC, BAC Secretariat,

ProcurementUnitandTWGs.Recommendation: The GPPB’s professionalization program, a long-term capacity building program that will include procurement as a professional career stream, is being pursued albeit slowly. As this is an important reform initiative with sustainable impact, it is recommended that the program be pursued more vigorously.

Results of the BLI Assessment71. The above findings are reflected in the BLI assessment.TheAPPIassessmentof the10pilotagenciesandfieldvisitsrevealedthatseveralprocuringentitieseitherdonotfaithfullycomplywith the legal requirement topost tender invitationsand awards in the PhilGEPS, or only do so irregularly.Weaknessesinthedeliveryofthetrainingprogramswerealsodiscoveredandtheprofessionalizationprogramhasyettobeimplemented. Finally, although the procurement system hasqualitystandards,thereislimitedmonitoringanduseofthesestandardsforstaffperformanceevaluation.Table7providesasummaryofthefindingsforthisassessment.

Pillar III: Procurement Operationsand Market Practices

72. This pillar looks at the operational effectiveness and

efficiencyoftheprocurementsystemswithintheimplementing

entityresponsiblefortheconductoftheprocurementactions.

It looks at the market response as one way of judging the

qualityandeffectivenessofthesystem.Graph3showstheBLI

assessmentscoresofthefollowingindicatorsthatconfirmthe

CPARfindingsregardingtheirlevelsofachievement:

(6)efficiencyofprocurementoperationsandpractices:

Lessthan50percentofthebaselineswerefound

tobemet.

(7)functionalityofthepublicprocurementmarket:Market

responsetopublicprocurementsolicitationisweak

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 12Rating: 5/12 or 42%;Level of Achievement is Partially Achieved.

30

atextbook-to-studentratioofonetoone.Moreover,bidding

timehasbeencutinhalf,andtransparencyisattainedthrough

compliancewiththerequirementofpostingadvertisementin

thePhilGEPSbysomeagencies.

75. Performance at the Local Government Level. While

there are built-in provisions within the law that ensure fair

competitionandwidercoverageofparticipation,suchasthe

publicationandpostingofbidnoticesatthePhilGEPSwebsite,

publicbiddingattheLGUlevelstillfailstoattainasufficient

levelofcompetitiveness.Thereareanumberofcontributing

factors.• Contractorsarerequiredtoundergoaccreditationpriorto participating.• Somecitygovernmentsrequiresuppliersandcontractors tosecurealocalbusinessregistration,effectivelyexcluding thoselocatedoutsidethecity.• Competitionislimitedbecausesuppliersarenotinterested inthesmallamountsofLGUcontractsandtheproject locationsmaynotbeconvenient.• NotallLGUsvisitedwereawareofthePhilGEPSwebsite andnotallarepostingtheresultsofbidding.• PublicofficerswithintheLGUshavereportedcollusion amongbiddersandbetweenbiddersandofficials,aswell aspoliticalinterference.

• Publicofficershavealsoreportedmonopoliesestablished

bysomepharmaceuticalcompaniesforpublicpurchasing

ofmedicinesandmedicalequipment.

Good procurement performance at thenational government level is the result of effective training programs offered at the national level. Likewise, poor performance at the LGU levels reflects the inadequacy of training programs that do not meet local government demands. The private sector is excluded from training altogether.

SCOREMAX. SCORE

Graph 3 - Procurement Operations and Market Practices

0Pillar IIIProcurementOperationsand PublicProcurementMarket

Indicator 6EfficientProcurementOperations

Indicator 7Functionalityof PublicProcurementMarket

20

30

40

16

30

5

12

49

7

Indicator 8Existence of Contract Administration andDispute Resolution

�09

(8)existenceofcontractadministrationanddispute

resolutionprovisions:Adequateprovisionsexistfor

contractadministrationanddisputeresolutionand

qualityofcontractadministrationpracticessubstantially

metthebaselineelements.

Efficiency of ProcurementOperations and Practices

Findings73. Procurement Competence and Skills.Thefirstvolume

of the GPMs on Procurement Systems and Organizations

defines the qualification requirements for members of the

BAC,TWG,andtheBACSecretariattobeestablishedineach

government entity. It defines the duties and responsibilities

of these procurement officials and spells out their skills and

knowledge requirements. The DBM, as chair of the GPPB

and agency in charge of the rationalization program of the

government,issettoapprovetheguidelinesforthecreation

ofProcurementUnits,dependingonthenumberandamount

ofprocurementtransactionshandledbytheentity.However,

thereisnosystematicmatchingofskillsagainstrequirements

for competitive recruitment. Moreover, some staff required

toundertakeprocurementactivitiesonanadhocbasishave

insufficientknowledgeorhavenoaccesstoprofessionalstaff

thatcanprovidetheknowledge.

74. Performance at the National Level.Institutionalpolicies

andproceduresconsistentwiththenewprocurementlawexist

atNGAs,particularlyatthecentraloffices,indicatingsufficient

capability to implement the intended procurement reforms.

Competitive bidding since the GPRA’s implementation has

shown substantial savings. The DPWH reported an average

reductionof15to20percentofcontractcostwhencompared

withbudgetestimates.TheDOHreportedanaveragereduction

of27percentinthepricesofpharmaceuticalsduetoincreased

competition. As of 2006, the DepEd had realized a total of

Php2.6 billion in savings, with an average reduction of 50

percentinthepriceoftextbooksthatallowedachievementof

3�

76.Whilethelawrequiresthatprocurementshouldasarulebe

donebypublicbidding,inalmostallLGUs,alternativemodes

ofprocurementarestillpreferred,particularlyshopping,direct

contractingandcontracts“byadministration.”Onereasonfor

thismaybethatinseveralLGUs,especiallythesmallerones,

officialsagreed that transactions subjected topublicbidding

end up costing more, and they feel that contracts in small-

sizedLGUsarenotworththeextratimeanddocumentation.

For small contracts, like the construction of artesian wells

and some barangay maintenance works, seeking registered

contractorsmayattimesbecomemorecostly,especiallyinthe

caseofsmallLGUswheretherearelimitedchoices.Thelength

of time contractors must wait for payment also discourages

participation,sincesmallcontractorsdonothavethenecessaryresources.

77.Goodprocurementperformanceatthenationalgovernment

levelistheresultofeffectivetrainingprogramsofferedatthe

national level. Likewise,poorperformanceat the LGU levels

reflectstheinadequacyoftrainingprogramsthatdonotmeet

local government demands. The private sector is excluded

fromtrainingaltogether.Recommendations: (a) The national training program should be improved as a short-term solution and should include potential private sector bidders. (b) The Professionalization Program, which is the long-term solution, should be expedited.

78. Recordkeeping. The Commission on Audit has issued

guidelinesthatenumeratetheprocurementrecordsthatmust

bekeptforauditingpurposes.However,inthecaseofboth

NGAsandLGUs,recordkeepingpracticesvaryfromoneagency

to another, as there is no integrated policy on the creation,

identification,classification,retrieval,receiptandtransmission,

storage and protection, disposition and preservation, or

sharingofinformationandrecords.NeithertheGPRAnorthe

GPMs provide for systematic records management, and no

commonstandardshavebeensettomaximizeutilityandavoid

duplication and repetitive operations. None of the agencies

sampledhadsystematicallymanagedtheinformationrecorded

inprocurement transactiondocuments inorder tomaximize

its value. Recommendation: The GPPB should immediately establish norms for safekeeping of records and documents related to transactions and contract management. A disclosure policy should be issued.

Results of the BLI Assessment79.Theabovefindingsarebasedprimarilyonfieldvisitsand

the APPI assessment of the pilot agencies, and provide a

ground-levelviewofthedifficultiesandissuesthatarefaced

in actual procurement operations that hamper procurement

reform.Indicator6receivedascoreof5outofapossible12

points,or42percentcompliance,forapartialachievementof

baselinesandahighlevelofriskbecauseoftheprocurement

operations and practices that need further improvements to

correctsubstantialweaknessesandgapsatboththenational

andlocallevels.Table8providesasummaryoftheratingsfor

thisassessment.

Table 8: Summary of Scores for Indicator 6, Pillar III

Sub-Indicators Score Max. Score6(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.

In the case of both NGAs and LGUs, recordkeeping practices vary from one agency to another, as there is no integrated policy on the creation, identification, classification, retrieval, receipt and transmission, storage and protection, disposition and preservation, or sharing of informationand records.

32

Functionality of thePublic Procurement Market

Findings80. Effective mechanism for public-private sector partnership.Inaprocurementprocess,therearetwoactors,thebuyerand the seller. Theacquisitionofgoods,worksorserviceswillnotbecompleteifthesetwoactorsarenotabletocometoanagreement.Recognizingthis,theGPRAprescribesvarious rules that create a level playing field for prospectivebidders, based on two governing principles: transparency inthe procurement process and contract implementation, andcompetitiveness fostered by extending equal opportunity toprivate contracting parties who are eligible and qualified toparticipate.TransparencyandaccesstoinformationonpublicbiddingisassuredthroughpostingofnoticesinthePhilGEPS,nationalnewspapersand inotherconspicuouspublicplaces.Toenhance transparency, the lawmandates thepresenceoftwo observers, “one from a duly recognized private groupin a sector or discipline relevant to the procurement athand, and theother fromanon-governmentorganization.”Competitivenessisstronglyencouragedbytherequireduseofstandardbiddingdocuments,formsandcontracts,andgenericspecifications,reducingdiscretioninthebiddingprocess,andbyensuringfulldisclosureoftheawardandpost-qualificationcriteria. To further ensure a level playing field, a privatesectorrepresentativeisappointedasavotingmemberoftheGPPB,and theaccreditationofanumbrellaorganization forconsultantsisalsoprovidedintheGPRA.

81.However,statisticsshowedthatanaverageofonlythree

biddersparticipate inpublicbiddings, indicatingtheabsence

of a competitive market. One reason is lack of knowledge

byprivatecompaniesofhowthepublicprocurementsystem

operates, because Government has not included them in

its training program. Recommendation: The bidders and other interested private sector companies, particularly small businesses, should be encouraged to attend training programs on the procurement system.

82. Private Sector Organizations. Three major groups of

tradeorganizationshaveaninterestinthepublicprocurement

system:(i)twoprominentassociationsofcivilworkscontractors,

who number over 8,000: the Philippine Contractors’

Association(PCA)andtheNationalContractorsAssociationof

thePhilippines(NACAP);(ii)suppliersortraders,mostofwhom

aremembersofthePhilippineInstituteofSupplyManagement

(PISM);and(iii)registeredconsultants,whomaybemembers

oftheConfederationofFilipinoConsultantsoroftheCouncil

of Engineering Consultants of the Philippines (CECOPHIL).

Theseorganizationshaveanimportantroletoplayinkeeping

theplayingfieldlevel.

83. However, the private sector dealing with the public

procurement market appeared to be relatively weak and

competition is limited due to monopolistic or oligopolistic

features in important segments of the market. In works

contracts, the trend is that many bidders submit expression

of intent to bid, but few actually submit bids. There is a

perception that collusion or rigging of bids is common,

particularlyforbigticketcontracts.Anotherreasonforthelow

competitionrateistheperceptionthatgovernmentprocesses

ingeneral,andprocurementinparticular,arecumbersomeand

bureaucratic.Procuringentitieshavedifficulty inattractinga

larger number of legitimate bidders. Recommendation: A strategic communication plan that would change the behavior and attitude of the private sector should be implemented. Quality training programs for the private sector should be included as part of the national training and professionalization programs.

84. Constraints to Market Access.Manyconstraintsinhibitprivate sector access to the public procurement market andreduce competition even for small contracts. Among themultiple constraints identified by the assessment team are:tedious payment processes, the intervention of politiciansin the procurement process, cumbersome procurementrequirements, difficulties in securing licenses and permits,and lack of access to credit. In the 2006 survey conductedby SWS on the effectiveness of the procurement law, fivefactorswereidentifiedbyrespondentsasprobablereasonsfordelaysintheimplementationofgovernmentprojects:corruptgovernmentofficials(55percent);lackoffunds(55percent);corruptcontractors(43percent);lackofcoordinationbetweengovernment officials and contractors (29 percent); and redtape(16percent).

85.Constraints in the Procurement of Textbooks. In theprocurement of textbooks by the DepEd, the losing biddersprotested the award even though the winning bid metthe specifications and requirements for content, quality ofmaterials,andprinting.DespitetheWB’sthoroughreviewoftheprocessanddocuments,thelosingbiddersevidentlyusedtheinfluenceofsomepoliticianstoraisetheirproteststothelevel of a Congressional inquiry, making this procurement amuchpublicizedevent.Notcontentwith thepoliticalarena,thelosingbiddersbroughtthecasetothecourts,questioningthe propriety of the awards and the application of the WBProcurementGuidelines.Althoughthelowercourtsidedwiththelosingbidders,thehighestcourtoftheland,theSupremeCourt, reversed the lowercourt’sdecisionandruled in favoroftheproprietyoftheawardandtheapplicationoftheWBGuidelines, in effect clarifying that theWBLoanAgreementisan internationalorexecutiveagreementasprovidedfor intheGPRA.

86.Constraints in Civil Works Projects.Acaseofcollusion

in DPWH procurement contracts resulted in three failed

biddings. The recommendations of award for two contract

packageswererejectedbytheWBonthegroundsofexcessive

33

bidpriceandunbalancedbids,andDPWHwasrequestedto

investigate the matter but found no evidence of collusion

amongthebidders.Asubsequentrebiddingtookplaceafter

theprojectcostestimateswererevisedupwardsbyabout10

percent.Whenthebidscameinhighagain(about30percent

higherthantherevisedcostestimates),theWBagainrejected

theaward recommendations for the same reasons. The two

rejectedpackageswerethenredesignedintothreepackagesby

changingthepavementtypes,andathirdbiddingtookplace.

This time, the results for each package showed the lowest

bidderssubmittingbids15percentabovethecostestimates,

with the losers’ bids in each case quite closely bunched

together and significantly higher than the lowest bidders’

bid. The analysis of the bid data presented unmistakable

evidenceofcollusionineachofthethreepackages,andthe

recommendationsofawardwererejectedforthethirdtime.

87.Constraints to Contracting in LGUs.Thefixedandlimited

termofofficeofthelocalchiefexecutive(threeyears,witha

maximumofthreeterms),coupledwiththetimetakentobuild

localprocurementcapacity,areamongtheissuesconfronting

localgovernments.However, theroleoftheprivatesector is

alsoafactor.Misbehaviorofcertaincontractorscanresult in

rejection of bids and delays in completing bidding, slowing

project implementation to the detriment of rural residents.

TheLGUofPanaon,MisamisOccidental, responded to such

asituationbycreatingan“IslandofGoodGovernance.”This

LGUrejectedbidsthatclusteredabovethepre-bidestimates

andofferedidenticalunitpricesformostitems,submittedby

contractors who had obtained bid securities from the same

entity.Butprovingcasesofcollusionremainsdifficult,sodespite

theLGU’scommendableefforts,theseerringcontractorshave

been allowed to continue bidding in Panaon until collusion

is adequately proven and the appropriate sanctions areimposed.

88.Pre-qualification and Eligibility Screening.Under theprocurementlawanditsimplementingrulesandregulations,pre-qualification is replaced by an eligibility check and astrong post-qualification process. To lessen subjectivity, apass/fail evaluation is applied during eligibility check basedonadefinedsetoflegal,technicalandfinancialcriteria.Onlybiddersthatpasstheeligibilitycheckareallowedtosubmitabid3. Thereafter, thewinningbidundergoesverificationandvalidationduringpostqualificationtoensurethatithaspassedalltherequirementsandconditionsasspecifiedinthebiddingdocuments4. However, the development partners believethateligibilityscreening,likeuseofABC,resultsinrestrictingcompetitionandhascontributedtothelowobservednumberofcompetingbidders(anaverageofthreepercontract).Theeligibility check required,amongother things, submissionofdocuments that did not provide evidence of the technical,financialandlegalcapacityofthebidder,and,abiddermightbe disqualified for non-submission of a minor documentaryrequirement.Forthesereasons,eligibilityscreeningcannotbe

applied for foreign funded procurement. Recommendation. To improve competition, development partners recommend that empirical data be gathered and presented to Government demonstrating that eligibility screening, even though complemented by a strong postqualification process, is less effective than pre-qualification, and that an independent review be conducted on the effectiveness of eligibility screening requirements in the Philippines, in particular for documents that are not related to the technical and financial capacity of the bidder.

89. Approved Budget for the Contract or Bid Ceiling.GPRA mandates imposition of an Approved Budget for theContract (ABC) that sets a price ceiling; any bids that areabovetheABCareautomaticallyrejected5.TheGovernment’srationale for this rule is that it helps contain the incidenceofcorruptandcollusiveactivities.Sofar, theGPPBhasbeensatisfiedwiththeresultofthemandatoryimpositionofABCinalllocallyfundedcontracts.However,thesituationisdifferentforforeign-fundedcontracts,whereABCisnotanacceptablerulebecauseitlimitscompetition.InthePhilippines,theCPARfound that theaveragenumberofbids is three, too few toachieverealcompetitionforpubliccontracts.Forthisreason,TheWBdoesnotacceptABCfor ICB,andADBandJBICdonotacceptitfortheirlocalcompetitivebiddingmethodeither6

(theWBdoesallowABCasbidceilingundercertainconditionsforNCB).

90.TheABCruleimposesparticularlimitationsininternationalbiddingbecauseinternationalfirmsfacehighercoststhanlocalones andABCdoesnot always take this into consideration.TheCPARcarriedoutananalysisofbidprices in relation toengineers’ estimates and Approved Budget for the Contract(ABC),basedonaNovember2004studyreportoncontractors’qualificationandbidprices thatcoveredtheprocurementofDPWH from 2002 to 2004 of 164 contracts funded by theWB,ADBandJBIC.TheCPARanalysisfoundthatthelowestevaluated bids (LEB) for foreign-funded contracts were 1.3timestheABC(seeFigure3).Thereasonsforthevariancewereidentifiedasfollows:a.materials,equipmentandlaborcostsquotedbythewinningcontractorsarehigher;b.theindirectcostormark-upishigherthanthestandardsetbytheGOP.

91.Internationalpracticerejectssuchpricecontrolmechanismsbecausepricecontrolisinappropriateinamarketsystem,wherecontractpricesshouldbesetthroughopencompetition.Infact,ABCcanactuallyencouragecollusionamongasmallnumberof bidders. Thus, the development partners believe that thebidceilingshouldbeabolishedonceGovernment issatisfiedthat its currentpurpose in limiting the incidenceofcollusive

3 Section 23 of the Government Procurement Reform Act, Republic Act No. 91844 Section 34, Id.5 Section 5(a) of the Government Procurement Reform Act, Republic Act No. 91846 Procurement Guidelines of ADB, JBIC and WB

34

bidding environment has been served. Recommendation: Development partners recommend that empirical data be gathered and presented to Government demonstrating that ABC-type price ceilings do not provide long-term benefits. This analysis should be accompanied by the results of three other empirical studies (i) a comparison of cost or engineer’s estimates with ABC to determine how reasonable the ABC

Table 9: Summary of Scores, Rating for Indicator 7, Pillar III

International Standard/Sub-Indicators Score Max. Score7(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 9Rating: 4/9 or 44%;Level of achievement is Partially Achieved.

limits have been in practice, (ii) and an analysis of whether the current low participation of bidders is the result of imposing a bid ceiling, and (iii) a report on the effectiveness of the ABC rule in relation to contract administration and the quality of completed works. The Study will also cover variation orders resulting to substantial cost increases in the contracts awarded using ABC.

Results of the BLI Assessment 92.Indicator7wasgivenascoreof4pointsoutofmaximum

scoreof9points,or44percentlevelofcompliance,indicating

partial achievement as several areas in the functionality of

the public procurement system need further improvement.

Governmentneeds topromoteprograms thatbuildcapacity

among private companies, including small businesses, and

offer training to help firms enter the public procurement

marketplace.Theprivatesectorisrelativelyweak,competition

is limited because of monopolistic or oligopolistic features

in important segmentsof themarketandbecause thereare

constraintstoaccesstothepublicprocurementmarket.Table9

providesasummaryoftheratingsforthisassessment.

35

WB ADB JBIC KFAED

Figure 3: Analysis of Approved Budget Ceiling and Lowest Evaluated Bid

ApprovedBudgetCeiling(ABC)inMillionPesos

Low

est

Eval

uate

dBi

d(L

EB)i

nM

illio

nPe

sos

DPWH Foreign-Assisted Projects (200�-2004)

Contract Implementationand Completion

Findings93. Contract Administration. The General Conditionsof Contract of the PBDs and the Guidelines on ContractImplementation provide procedures for final acceptance,inspection, testing,qualitycontrol,andcontractamendmentfor each type of procurement. The standard clauses arebased on internationally accepted standards and largelyharmonized with those of the WB, ADB, and JBIC. Qualitycontrolproceduresforspecifictypesofgoods(books,drugs,computers)arenormallyspecifiedinthecontractdocuments.Quality control is carried out through the agencies’ owntestingfacilitiesorbycompetentoutsidefirms.IntheDPWH,construction supervision for foreign-assisted infrastructureprojects is normally done by independent engineering firmsin coordinationwithgovernment supervisorsand inspectors.For government-funded infrastructure projects, constructionsupervision isdonebyqualifiedgovernment supervisors andinspectors.However,whilepaymentschedulesarewritten incontracts, final payments for completed deliveries or worksgenerally take a long time to be released, often extendingbeyondthecontractprovisions.Thedelay isdue tocautioushandlingbytheprocuringentityoftheinspectionprocessanddocumentation review. Recommendation: Procedures for final payment should be streamlined and the changes should be reflected in the Generic Procurement Manual.

94. Dispute Resolution. The GPRA provides for disputes

arising from contract implementation to be submitted for

arbitration under the Arbitration Law (RA 876), replaced by

the Alternative Dispute Resolution Act (RA 9285), which is

consistent with generally accepted practices for neutrality

of arbitrators, due process, expediency, and enforceability.

AlternativeDisputeResolutionprovisionsmaybe resorted to

bypartiesuponmutualagreementanditisassumedthatboth

partieswillhonorthedecisionrenderedbythedulyappointed

authority.Forconstructiondisputes,ExecutiveOrderNo.1008

Table �0: Summary of Scores and Rating for Indicator 8, Pillar III

Sub-Indicators Score Max. Score8(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.

creates an Arbitration Machinery for Construction Disputes.

The GPRA further provides that the parties may agree in

writingtootheralternativemodesofdisputeresolution.The

settlementofdisputes througharbitration is incorporated in

theFormofContracts inthePBDs.TheGovernmentaccepts

internationalarbitrationforinternationalcompetitivebidding,

so longas thisprovision is included in theconditionsof the

loanagreementandcontractdocuments.However,thereisno

systemtomonitorthefinalresolutionandoutcomeofdispute

resolutions.

95. Enforcement of Dispute Resolution Process. The

Philippines is a member of the New York Convention on

EnforcementofArbitralAwards,whichtreatsanarbitralaward

as final, unless an appeal is filed on pure questions of law

before an appellate court within a given period. The GPRA

providesthatarbitralawardsareappealablebywayofPetition

for Review to the Court of Appeals on questions of law. A

partymayalsogotocourtforenforcementoftheaward.

Result of the BLI Assessment96.The above findings support the BLI assessment results. A good assessment score was achieved for this indicator at

7pointsoutofpossible9,or78percentcompliance.Except

fortheelementof“finalpaymentbeingprocessedpromptly

asstipulatedinthecontract”,thepublicprocurementsystem

meetsallotherelementsofgoodcontractadministrationand

implementation. While all the elements of a good dispute

resolutionprocessaremet, includingenforcing theoutcome

thereisnomechanismformonitoringtheoutcomeofdispute

resolutioncases.Table10providesasummaryoftheratings

forthisassessment.

Pillar IV: Integrity and Transparency of Public Procurement System

97.Pillar IV looksatwhetherthepublicprocurementsystem

operates with integrity, has adequate internal controls,

36

ofCOA,aside fromauditing thebooksofaccounts, includepromulgation of accounting systems, which it carried outin 2001 through the issuance of the National GovernmentAccountingSystem(NGAS).TheNGASisnowbeingusedbyallNGAsandLGUs7. WhiletheCOAconductspost-auditoftransactions, italsocarriesout special fraudaudit.TheCOAdoesnothaveprosecutorialfunctions,althoughitmayinitiatecriminal, civil or administrative action by filing a complaintbeforetheappropriatebody,suchastheDepartmentofJusticeor theOfficeof theOmbudsman.Criminal prosecutions areinitiated by the Ombudsman as a complainant, with COAproviding the evidence or witnesses for the prosecution.ComplaintsbroughtbyprivatepartiesgenerallyattachaCOAreportasavitalcomponentofthecomplaint.

99. Enforcement and Follow-up on Audit Findings and Recommendations. Records of the COA National CapitalRegion office from 2004 to 2006 show that an average of56 percent of all notices of disallowance were procurementrelated.However, disallowanceswithfinality are few, as thecases tend to linger on at various stages of appeal, furtheraggravated by the length of time between the discovery ofanomaliesbyCOAandthefilingofacase(upto12months).AcomparisonofrecordsatCOAandtheOmbudsmanfoundthat COA’s mandated task of monitoring the cases referredto the Ombudsman for prosecution is not being effectivelyundertaken,andthatthere isnocomprehensivedatabaseofprocurementandotherrelatedcases.Muchweighthasbeenplaced on interagency cooperation among the Civil ServiceCommission (CSC), COA and the Ombudsman that wassupposedtodeliverresultswithrespecttotheprosecutionofcases.Internally,however,theCOAregionalofficesthatweresupposedtosubmitcomprehensivereportstotheHeadOfficeoncasesfiledandpendinghavenotgenerallybeenperformingthis task.Recordsat theOmbudsman show that therewereonlyafewinstanceswhencasesorcomplaintswerebroughttotheOmbudsmanbyCOA,butthisdoesnegatethefactthatCOAplaysasignificantroleintheprosecutionofcases.

100.FinancialauditsarecarriedoutannuallybyCOAaspartofitsmandatetoreporttoCongressandthePresidentontheaccountsofallagenciesandinstrumentalitiesofgovernment.Procurementaudit isnotyetgivenenough focus inmostofthe audit programs because most auditors have inadequateknowledgeofthelaw,itsimplementingrules,theharmonizedbiddingdocumentsandcontractforms,andtheprocurementmanuals; and there isnoprocurementauditguide toactasthebasisforincludingprocurementauditintheannualauditprogram.Mostauditorsarenottrainedtocarryoutrisk-basedaudit tailored for risk management. Recommendation: A procurement audit guide should be developed and implemented by COA, with particular focus on the audit of the implementation of the GPRA. A training program on procurement should be developed and implemented for auditors, with the procurement audit guide as a primary

sufficientappealsmechanisms,andhasappropriatemeasures

inplacetoaddressthepotentialforcorruption.Graph4shows

theBLIassessmentlevelsbasedonfourindicators.

(9) Internal control and audit: The elements of quality,

reliabilityandtimelinessoftheinternalandexternalcontrols

arepartiallyachieved.InternalAuditUnitsneedtobecreated

inallentitiesorstrengthened,andenforcementoftheGPRA

usingtheauditingsystemneedstobeimproved.

(10) Appeals mechanism: Efficiency and integrity of the

existing appeals mechanism partially achieves the baseline

elementsofawell-functioningpublicprocurementsystem,

exceptthat the independenceof theadministrativereview

bodyisnotassured.

(11)Accesstoinformation:Althoughthequality,relevance,

easeofaccessandcomprehensivenessofinformationonthe

publicprocurementsystemsubstantiallymetthebaselines,

makingtheinformationavailablehasnotbeeneffective in

changingbehavior.Thereisanurgentneedtoimplementa

strategiccommunicationstrategyto increaseawarenessof

theprocurementlaw.

(12)Ethicsandanti-corruption:Thenatureandscopeofthe

anticorruptionprovisions inthepublicprocurementsystem

substantiallymetthebaselines,assufficientethicsandanti-

corruptionmeasuresareinplace.

Internal Control and Audit

Findings98. Legal Framework. The 1987 Constitution provides foran independent Commission on Audit (COA) that has thepower toauditall accountspertaining togovernment fundsnationwide,includingprocurement-relatedtransactions.COAisrequiredtosubmitanannualreportofeachentity’sfinancialstatementstotheLegislativeBranchintimeforreviewpriortodeliberationoftheproposedannualbudgetappropriation.TheGovernmentAuditingCode (RA1445)and theGovernmentAccountingandAuditingManualdiscuss theprocedures forinternalcontrolandmanagementofallfinancialtransactionsand define the system of checks and balances. The powers

SCOREMAX. SCORE

Graph 4 - Integrity and Transparency of the Public Procurement System

0Pillar IVThe Integrityand Transparencyof ProcurementSystem

Indicator 9 EffectiveControland Audit System

Indicator 10Efficiency ofAppealsMechanism

20

30

4036

Indicator 11Degree ofInformationAccess

�0

Indicator 12Ethics andAnti-CorruptionMeasures

50

6054

8

159

15

2 3

17

21

37

training material, and both the guide and the training should include a risk-based approach to audit. The professionalization program of GPPB is expected to include COA auditors as participants.

�0�. Internal Audit Units in National Agencies. Undera 2003 Administrative Order, each agency is mandated tostrengthen internal control through the creation of InternalAudit Units (IAUs) with adequate personnel and budgetaryprovision.AsofJanuary2007,56percentofNGAs,52percentofSUCsand73percentofGOCCshadcreatedIAUs8.However,onlyanaverageof28percentoftheseunitsarefunctioninginaccordancewithinternationalstandards.IntheAPPIreviewof 10 pilot agencies, seven had established internal controlunitsforannualauditofprocurementactivities,buttheywerefound to be mostly performing pre-audit and checking ofcompletenessofsupportingdocuments,whichdoesnotmeetinternational internalauditingstandards.Recommendation: Where they are lacking, IAUs should be created. Where they have been set up but are not performing in accordance with standards, they should be strengthened. It would be timely to factor this requirement into the ongoing rationalization of public administration. An Internal Audit Manual that incorporates international standards and the local internal

control rules and regulations should be finalized and approved for roll-out nationwide. DBM and PAGC should collaborate to ensure satisfactory performance of internal control systems in government, particularly in implementing and enforcing the procurement law.

102.AWBIDFGrantissupportinganefforttostrengthenIAUs

foreffectiveprocurementmonitoringandenforcementthatis

beingimplementedbythePresidentialAnti-GraftCommission

(PAGC).Underthisproject,theGovernmenthasmappedthe

creationof IAUsnationwide, including inLGUs,assessedthe

qualityoftheinternalauditfunction,andwilldevelopaquality

assessmentguide forperiodic internal agencyoversight. The

projectwillalsodevelopaninternalauditmanualfornational

agenciesthatwillbeinaccordancewithinternationalstandards

and also incorporate national internal control rules and

regulations.Completionoftheprojectwill,attheagencylevel,

closethelooponprocurementimplementation,asitisexpected

that the IAUswill regularlyadvise theheadof theprocuring

entityofanyinadequacyinprocurementcontrolsandpromptly

submitreportsofdeviationfrompoliciesandstandards.Thiswill

significantlycontributetotheimplementationofprocurement

reformsattheagencylevel.

�03. Internal Audit Units in LGUs.Morethan65percentofLGUs(citiesandmunicipalities)donothaveIAUs.Wheretheyhavebeencreated,thequalityofperformanceisnotonaparwithinternationalinternalauditingstandards.Someoftheseunitsarecommonlyreferredtoaspre-auditunitsandareactuallythedivisionsundertheOfficeoftheAccountantinchargeoftheconductofpre-audit.AllLGUsthathadestablishedanIAUadmitted that they have not yet conducted a procurementsystem audit. Most of the findings of internal auditors arenotformallycommunicated,buttreatedinformallyas“insideinformation.”Governmentprocurement, as it ispracticed intheLGUs,isstillfarfromfulfillingtheprovisionsandintentofthelaw,howeverneithertheinternalnortheexternalauditorshave come up with a comprehensive audit of procurementsystemsinordertoidentifyareasofsignificantdeviationandthecausesandconsequencesofnon-compliance.

�04.Auditors’ Procurement Training.Auditorsplayamajorrole in ensuring that the appropriate controls support theimplementationofthepublicprocurementsysteminaccordancewiththelegalandregulatoryframeworkandthatappropriatemeasuresareinplacetoaddressthepotentialforcorruptioninthesystem.However,itwasreportedthatmostfieldauditorsofCOAarenotproperlytrainedintheGPRA,itsimplementingrulesandregulations,biddingdocuments,formsandstandardcontracts, the generic procurement manuals, and internalcontrolfeaturesthattheyaresupposedtoassessduringaudit.Todate, there isnoprocurementauditguide to standardizeinput to the annual audit program. Recommendation: A Procurement Audit Guide should be developed to guide the conduct of auditors, and training in its implementation should be conducted for all auditors on a regular basis.

7 e-NGAS, the computerized version of NGAS developed by COA, was rolled-out beginning 2003. As of 30 September 2008, 196 NGAs and 141 LGUs have completed its installation.8 DBM and PAGC continue to collaborate to ensure the systematic issuances of internal control guidelines and internal audit manuals. Also, DBM issued a circular last 14 April 2008 advising all agencies that they could create and activate IAUs pending approval of their Rationalization Plans.

Procurement audit is not yet given enough focus in most of the audit programs because most auditors have inadequate knowledge of the law, its implementing rules, the harmonized bidding documents and contract forms, and the procurement manuals; and there is no procurement audit guide to act as the basis for including procurement audit in the annual audit program.

38

Result of BLI Assessment�05.The above findings support the BLI assessment results. The score is 8out of 15points, for 53percent compliance,

or partial achievement of the baselines. An adequate legal

framework, organization, policy and procedures for internal

andexternalcontrolexist,butthereisnospecificperiodicrisk

assessment or controls tailored to risk management. Audits

are carried out annually, but response to or implementation

of theauditors’ recommendationcantakeuptoayear.The

creationofanInternalAuditUnitineachagencyismandated,

butmostagencieshavenotcompliedwiththis requirement,

and those that have are not performing in accordance with

international standards. There is no internal audit manual

to guide internal auditors. While auditors have general

knowledgeoftheGPRA,theyarenotsupportedbyspecialists

onprocurement,becausethereisnotrainingforauditorson

procurement. Table 11 provides a summary of the ratings.

Efficiency of Appeals Mechanism

Findings�06.Due process. TheGPRAprovidesthatprotestsintheform

of “motions for reconsideration” with respect to decisions

involving contractor eligibility and qualification may be filed

with the procuring agency’s BAC. The motions are decided,

basedonthefacts,withinsevendays;ifthemotionisdenied,

thebiddermayfileaprotest inwritingwiththeheadofthe

procuring entity. Protests are resolved strictly on the basis

of BAC records. Procuring entity heads have the authority

to resolve the protest and render a final decision up to the

limit of their approving authority. The decision of the head

of theprocuring entity is normally consideredfinal, and the

procurementprocessproceedstothenextsteps.

�07.Administrative Review.Reviewofdecisionsiscurrently

lodgedwiththeOfficeofthePresidentwhich,byvirtueofthe

President’sbroadadministrativesupervisoryandreviewpowers

undertheAdministrativeCodeof1987,hasauthoritytogrant

remediesforprocurement-relateddecisionsmadebyheadsof

procuringentities.TheGPRAfurtherstatesthatdecisionsofthe

headsof theprocuringentitiesaresubject to judicial review,

anddesignatestheRegionalTrialCourtashavingjurisdiction.

However,thereisnoindependentadministrativereviewbody

toconductareviewofappealedcomplaintsasrequiredbythe

standards.Theprotestmechanismisalsoviewedasineffective

and is not utilized in view of the high and non-refundable

protestfees.Recommendation:A study should be conducted to review existing policies and procedures related to complaints and appeals in light of best practice in other countries, and to consider the designation of an independent administrative body, tapping an existing administrative review body with the appropriate mandate, and setting reasonable protest fees.

More than 65 percent of LGUs (cities and municipalities) do not have IAUs. Where they have been created, the quality of performance is not on a par with international internal auditing standards.

Table ��: Summary of Scores for Indicator 9, Pillar IV

Sub-Indicators Score Max. Score9(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 15Rating: 8/15 or 53%; Level of achievement is Partically Achieved.

39

�08.Publication of decisions:Thepublicationofdecisions

ondisputesresolvedbytheprocuringentityisnotmandatory

andislefttothediscretionofthereviewbodies,makingaccess

difficult. Recommendation: A mechanism, which could be the subject of an executive issuance, should be developed to publish the decisions of the BACs and entity heads on procurement-related disputes and protests.

109.Complaintreviewbody.TheGPRAprescribesthatappeals

fromthedecisionoftheHeadofProcurementEntitybefiled

eitherwith theOfficeof thePresidentor the judicial courts.

OECDhasclarified that thebody shouldbean independent

administrativereviewbody.TheOfficeofthePresidentisnot

an independent administrative review body, neither are the

judicialcourts. In this regard, thepublicprocurementsystem

is not meeting the standards. Recommendation: A study should be conducted to determine whether there is a need to create an independent complaint review body in accordance with international standards.

Result of BLI Assessment��0. The above findings support the BLI assessment results. This indicator scored9out of a possible 15points,for 60 percent achievement level. The GPRA prescribes thatthedecisionsofentityheadsandtheOfficeofthePresident,asappealbodies,shouldbebasedonfactsandrenderedwithauthority and enforceability under the law. The complaintsreviewsystemisefficient,butthecomplaintreviewbodyisnotindependentandautonomous.Whilethesystemoperatesinafairmanner,itdoesnotresultincorrectiveremediesbutonlyin sanctions and penalties. Decisions are not required to bepublishedandaccessisdifficult.Table12providesasummaryofthesefindings.

Access to Information

Findings���.Publishing Procurement Information. Several readilyandwidelyaccessiblesystemsarenowprovidingprocurementinformation. PhilGEPS, the primary and definitive source ofinformation on government e-procurement, now offers anelectronicbulletinboard,e-catalogue,andsuppliers’ registry.Exceptforbarangays,70percentofallpublicprocuringentitiesareregisteredasPhilGEPSusers.Whilenotallagenciessubmittheirprocurement informationto thePhilGEPSoravailof itsservices, and the required Internet technology is accessiblein only about 30 percent of the whole country, cyberspacemodernization is spreading so fast that the new technologyshouldovertakeotherchannelsofcommunication inashorttime. Investing in modernization has proven to be a gooddecisionbyGOP.

112. The GPPB website (www.gppb.gov.ph) providesinformationonpolicies,guidelines,issuancesonprocurement,andbidopportunitiesthatgovernmentagenciesarerequiredtopost. Itpublishes thenamesofcompaniesandfirms thatare blacklisted URB and suspended. The Uniform GuidelinesonBlacklisting(UGB)requiresallagenciestopublishblacklistedcompanynamesontheGPPBwebsite.

��3. Public Perception Survey on the Effectiveness of the GPRA. The2006 survey conductedby local surveyfirmSWSonthepublicperceptionoftheeffectivenessoftheGPRArevealed thatonly13percentof thegeneralpublic isawareof the procurement law after four years of implementation.TheresultisalarmingtoGOPbecausetheGPRAwasprimarilydesigned to be an anti-corruption measure, with stiffpenalties for simple procurement graft and misbehavior, theshortest of which is imprisonment of at least six years. Thelesspeopleknowabout it, the less valuewill theGPRAadd

Table �2: Summary of Scores for Indicator �0, Pillar IV

Sub-Indicators Score Max. Score10(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

Table �3: Summary of Scores for Indicator ��, Pillar IV

Sub-Indicators Score Max. Score11–Informationispublishedanddistributedthroughavailablemedia

withsupportfrominformationtechnologywhenfeasible 2 3

Rating is 67%; Level of achievement is Substantially Achieved.

to the fight against corruption. A dire need therefore existsforGPPBtoquicklydisseminateprocurementinformationviacommunication channels that will reach a broad majority ofcitizens.GPPBhasaddressedthisimportantissuebydevelopingaStrategicCommunicationPlan,withWBsupport.Theplanisdiscussedfurtherinthenextsection.Recommendation:The proposed Strategic Communication Plan should be approved and implemented, with the support of development partners. Adequate resources should be allotted to ensure its success.

��4.Public disclosure.Civilsocietyhasbeenclamoringforasystematicandrationalizeddisclosurepolicyforprocurementinformation and how specific bids relate to budgetedpublic expenditures. However, there is no disclosure policyon procurement-related information. Recommendation: Adisclosurepolicyonprocurement-relatedinformationshouldbeformulated,approvedbyGPPB,andimplementednationwidebyallprocuringentities.

Results of BLI Assessment115. The indicator scored 2 out of 3 points, or 67 percent.Although there is an electronic government procurementsystemandprocurementinformationispublished,accessibilityislimiteddueto:(a)technologylimitationsinfar-flungareas;(b)lackofcoordinatedandconsistentlyimplementedstrategiccommunications;(c)lackofcompliancebysomeagencieswiththerulesonpublication;(d)absenceofadisclosurepolicy.

Table13providesasummaryoftheratings.

Ethics and Anti-corruption Measures

Findings1�6. Ample Legal and Regulatory Provisions Addressing Corruption.The lawsand regulationsaddressingcorruptioninclude the Anti-Graft and Corrupt Practices Act, RA 3019,issued as early as 1955, the Code of Conduct and EthicalStandards forPublicOfficialsandEmployees issued in1989,and the most recent GPRA to address public procurementcorruption, issued in 2003. These are adequate laws toimplementgoodgovernanceandpreventcorruption.Theissuesarise in the implementationandenforcementof these laws,andtheDepartmentofFinance,theOfficeoftheOmbudsmanand the Presidential Anti-Graft Commission have recentlybegunconcertedeffortstoaddresstheseissuesthroughseveralprograms,suchasRunAfterTaxEvaders,RunAfterSmugglers,LifestyleChecks,IntegrityDevelopmentReviews,andIntegrityDevelopmentActionPlansofcorruption-ladenagencies.

117.Ininstitutingmeasurestoreduceprocurementcorruption,theGPRArequiresbidderstodiscloseinwritingwhethertheyarerelativesoftheheadoftheprocuringentityuptothethirdcivildegree.TheGPRAprovidesfortheissuanceofblacklistingguidelines,aswellassanctionsandpenaltiesforcivil,criminalandadministrativecases.ThePBDscontainadequateprovisionsonfraudandcorruptionintheInstructiontoBiddersandtheGeneralConditionsofContract.

��8. Defined responsibilities, accountabilities and penalties. TheGPRAclearlydefinesthecoverageoffraudandcorruption,andhasveryspecificprovisionsontheresponsibilitiesofpublicofficialsandprivateentities. Italsocoversoffenses,penalties,civilliabilities,andadministrativesanctionsthatmay

beimposedonerringpublicofficialsorsuppliers,contractors,

and consultants. The GPMs discuss the conditions when

conflictof interest, interventionofactivepublicofficials and

otherrelatedoffensesmayarise,alongwiththecorresponding

penalties.TheAnti-GraftandCorruptPracticesActprohibits

the intervention of former public officials in procurement

mattersinwaysthatbenefitthem,theirrelatives,andbusiness

orpoliticalassociates,financiallyorotherwise,forareasonable

periodoftimeafterleavingoffice.

��9. Evidence of enforcement. Records from the anti-

corruption agencies provide evidence of a few cases where

laws on corrupt practices have been enforced and of many

morethathavenotbeenactedon.(i) The Office of the Ombudsman investigated 38procurement-related cases from2004 to2006 for variousviolationsof theAnti-Graft andCorrupt PracticesAct (RA3019 issued in June 1955), Code of Conduct and EthicalStandardsforPublicOfficialsandEmployees(RA6713issuedinNovember1989)andGPRAissuedinJanuary2003.Someof these investigationshave resulted in thedismissal fromserviceor suspensionofpubliccareerofficialsandelectedofficials.However,a largenumberofcomplaintshavenotbeen acted upon, and some cases take a very long time:someofthecasespendingbeforetheSandiganbayan(thePhilippines’anti-graftcourt)werefiledmorethantenyearsago. The low enforcement capacity of the Ombudsman’sspecialprosecutionofficeandthatofthecourtsisamajorconcern.(ii) The PAGC investigated 37 procurement-related casesfrom2001to2006,resultinginthedismissalfromserviceofsomehigh-rankingpoliticalappointees.(iii)Inlinewithitslegalmandate,from2004to2006,COA–

4�

NationalCapitalRegionhad43noticesofdisallowance:6cases for theyear2004,27cases for2005,and10casesfor2006.Morethanhalfofthesewereprocurementrelated(24cases),withvalues involvedrangingfromPhp100,000toPhp279,144,701.Of the tennoticesofdisallowance in2006,onehadbeenlifted,onehadbecomefinal,andtherestareinvariousstagesofappeal.Noticesofdisallowancearebeingusedasbasis for the initiationofadministrativeorcriminalactionsagainsterringgovernmentofficialsandemployees.(iv) The Senate Blue Ribbon Committee investigated suchhigh-profile procurement cases as the Commission onElectionpollcomputerizationcontract,whichtheSupremeCourtnullifiedforrunningcontrarytotheGPRArequirementofpublicbidding;theBatangasPortlandacquisitionproject;

andtheInternationalAirportPassengerTerminalIIIProject.

Unsuccessfulprosecutionanddelaysinthetrialofprocurement-relatedcasesareduetoinadequatecapacityandtrainingandto failure todetect fraud inprocurementandgatherproperevidence. Recommendation: A special training program should be developed on procurement contract fraud detection, evidence gathering, and prosecution techniques. The target participants should be investigators, prosecutors and auditors.

�20. Special measures: Blacklisting and suspension of erring bidders, suppliers, and contractors.Asrequiredbythe IRR-A, theGPPB issuedGuidelines for theBlacklistingofErring Bidders, Suppliers, and Contractors in August 2004.Complianceisgoodforinfrastructureprojects,largelybecausetheDPWHistheonlyagencywithspecificinternalproceduresforblacklistinginfrastructureconstructors.Atpresent,thelistofblacklistedcontractorsisavailableandupdatedregularlyattheGPPBwebsite,whereGPPBhaspublishedmorethan250blacklistedorsuspendedfirms,andthis list issubmittedandactivelymonitoredbythePhilippineConstructorsAccreditationBoard(PCAB).TheprocessofblacklistingiscoordinatedwiththeConstructionIndustryAuthorityofthePhilippines(CIAP),which is mandated by the Contractors’ Licensing Law toconducttheblacklistingofcontractorsandthecancellationoftheirlicensesbasedonspecifiedoffenses.

121. However, the UGB has very limited application, and

lacks the coordinated enforcement tools to be effective.

The UGB can effectively strengthen the provisions of the

GPRA for administrative penalties, only if mechanisms for

its implementation are in place and functioning. Without

a concerted effort by all government agencies, the mere

existenceoftheguidelinesisnodeterrenttoerringsuppliers,

contractors or consultants. Unfortunately, there is a clear

indication of limited compliance by most agencies with

blacklistingproceduresandinthesubmissionoftheirblacklists

totheGPPB.Itislikewiseclearthatpenaltieslinkedwiththe

blacklisting process, such as contract termination, forfeiture

of securities, and imposition of liquidated damages, are not

imposedbytheagenciesonerringsuppliersofgoods,services

andconsultingservices.Someofthereasonscitedarestaffand

timeshortagesandtediousnessoftheprocedures.

122. The situation is evenmore critical in the LGUs,where

blacklisting is rarely undertaken. Field visits found no LGUs

with internal systems or procedures for blacklisting bidders,

suppliers,contractorsorconsultants.NotallLGUsareawareof

GPPBblacklistingguidelines,andthosethatareaware,seldom

comply. While some LGUs admitted that there are some

suppliersandcontractorswhofailtoperformafteranaward

hasbeenmade,theyaresimplyreprimanded.

�23. GOP Performance on Blacklisting. As of March 31,

2006,therewere182blacklistedconstructorsforinfrastructure

projects on the GPPB list, with 78 blacklisted by 8 different

agenciesand104byPCAB.Ofthoseblacklistedbygovernment

agencies,63werefromDPWH,4fromMetropolitanWaterworks

andSewerageSystem,3fromNationalPowerCorporation,3

from National Housing Authority, 2 from National Irrigation

Administration, and one each from Philippine Food Drugs

Authority, DOH, and PPA. The most common grounds for

blacklistingconstructorsbygovernmentagencieswere:

•rescissionofcontractduetofailuretocompleteproject(33

percent),

•abandonmentofproject(16.7percent),

•failuretocomplywithcontractualobligationsoranylawful

instructions(14.1percent),

•intolerablenegativeslippageofmorethan15percent(12.8

percent),

•falsificationofpublicdocuments(11.5percent),and

•qualityofmaterialsnotcomplyingwithspecifications,poor

performance,orunsatisfactoryqualityofwork(9.0percent

combined)

OfthoseblacklistedbyPCAB,56licenseswererevoked,20

suspended,and28deniedlicenses.Themostcommontypes

ofoffensesofPCABblacklistedconstructorswere:

•misrepresentationoftechnicalemployees(58.6percent),

•misrepresentationoffinancialqualifications(21.1percent),

•misrepresentationoftrackrecord(9.6percent),

•submissionofspuriousorfalsifieddocuments(5.8percent),

and

•abandonmentofproject(1.9percent).

�24. Application of national blacklisting to MDB-funded projects. Thenationallyblacklistedfirmsarenotautomatically

blacklisted in MDB-funded projects. Since the imposition of

such sanction against a firm triggers an inquiry and review

of the process leading to the blacklist, due process is being

observed; use of blacklisting in MDB-funded projects would

furtherrequirethatthegroundsforblacklistingareacceptable

to the MDBs and that the rules are disclosed to the public.

42

Recommendation: A study should be conducted to review the UGB with the objective of strengthening its enforcement mechanism and align it with international good practice.

�25. Special Anti-Corruption Program. Different agencies

have their own anti-corruption programs. The Ombudsman

(OMB) is theprimarygraftbusterundertheConstitutionand

hasembarkedonanumberofanticorruptioninitiatives.

•LifestyleCheckofpublicservants,wheretheactualassets

ofofficialsholdingsensitivepositionsarecomparedwith

theirincomefromgovernmentservice.TheStatement

ofAssetsandLiabilitiesmandatedbylawtobe

annuallyfiledwiththeOmbudsmanisabasicdocument

forinvestigationsincasetherearelargedisparitiesbetween

assetsandsalaryincome.

•AmorestructuredandelaborateapproachistheIntegrity

DevelopmentReview(IDR),whichlooksathow

governmentagenciesareaddressingcorruptionand

governanceissuesinternally.TheIDRhasbeenpilotedin17

agenciesanditisexpectedtobecomearegularprogramto

addresssystemicissuesofcorruption.

•AMulti-SectoralAnti-CorruptionCouncilwaslaunchedin

March2007involvingtheExecutiveDepartment,the

SenateandHouseofRepresentatives,Judiciaryand

ConstitutionalBodies,LGUs,andCSOs.TheCouncilserves

astheconsultativeandcoordinatingbodyfortheNational

Anti-CorruptionProgramofAction.

126.Asthearmof thePresident for implementingtheanti-corruptionprogramoftheExecutiveBranch,PAGClaunchedin2005theIntegrityDevelopmentActionPlan,whichaimstoidentifyspecificmeasuresneededtoavoidgraftandcorruption,includingdetectionandpreventionactivitieswithinanagency.Sofar,morethan50agenciesareparticipatinginthisplan.TheDepartmentofFinance(DOF)implements,throughtheBureauofInternalRevenue,theRunAfterTaxEvadersprogramaimingtodiscover,investigateandpenalizetaxevaders,andthroughthe Bureau of Customs (BOC), the Run After Smugglersprogram aiming to catch smugglers of goods through theportsandensurethatdutiesarecollected.

127. While Government has a number of anti-corruptionprograms in place implemented by several anticorruptionagencies,thesemeasuresarenotcoordinatedandsynchronizedto achieve results. Recommendation: A covenant among the oversight agencies (GPPB, COA, PAGC, DBM and the Ombudsman) should be agreed upon to strengthen the coordinative linkages, monitoring and enforcement of audit findings, and compliance with the procurement law. The covenant could be supported by the creation of a procurement sub-working group under the PDF Working Group on Governance and Anti-corruption. Special training programs on fraud detection for purposes of prosecution should be developed and conducted, targeting investigators, prosecutors and auditors.

�28.CSO and Private Sector Participation in Procurement Biddings. The landscapeof public servicedeliveryhasbeenchanging.Wheregovernmentwasoncethesoleactorinthearena of public service delivery, nowadays, citizens are bothbeneficiariesandactiveparticipants.Non-stateorcivilsocietyorganizations(CSOs)aretakingtheinitiativewheregovernmentisabsentorwheretheprivatesectordoesnotfinditprofitableto participate. The GPRA recognizes the significance of theCSOsandhasgiventhemacriticalroleinpublicprocurement,providing for their participation as observers at all stages ofpublicbidding.

129. A private sector representative sits in the GPPB and inits TWG, to provide private sector inputs in discussions onprocurementpolicies,procedures,andconcerns.Representativesfrom professional organizations and non-governmentorganizations serveasobservers in theBACsofgovernmentagenciestoensuretransparency intheprocurementprocess.These include, among others: PCA, Philippine Chamber ofCommerceandIndustry,PhilippineInstituteofCivilEngineers,NACAP, Philippine Institute of Certified Public Accountants,andtheConfederationofFilipinoConsultingOrganizationsofthePhilippines.TheTransparencyandAccountabilityNetwork,theCatholicBishops’ConferenceofthePhilippines,theMakatiBusinessClub,andtheNationalCitizens’MovementforFreeElections are some of the more active CSOs that send theirrepresentativesasobservers.

130. AlthoughtheGPRA’sobjectiveofensuringtransparencyinprocurementbymeansofmandatingCSOobserversinthebiddingprocessislaudable,itsimplementationisnotproducingthedesiredimpactontheground.Moreover,itssustainabilityisatriskunlessseriousremedialmeasuresareintroducedbytheGPPBandtheCSOsthemselves.Recommendation:A list of activities to increase CSO participation was agreed on at the August 8, 2007 CPAR consultation workshop (see Annex 5). This list should become the basis for a study to be undertaken on sustaining the involvement of CSO observers in the bidding process, including contract implementation.

While Government has a number of anti-corruption programs in place implemented by several anticorruption agencies, these measures are not coordinated and synchronized to achieve results.

43

�3�. Mechanism for Reporting Fraudulent, Corrupt or Unethical Behavior. The anticorruption agencies haveestablishedchannelsforreceivinginformationfromthepubliconfraudulent,corruptorunethicalbehavior.TheOmbudsmanhasembarkedonacommunicationcampaignusingtheradioandprintmediatoinformandencouragethepublictoreportsuchbehavior.Thereportmaybemadeinwriting,anonymouslyor otherwise, addressed to a given Ombudsman Office, orthroughthepublicassistancehotlinesusingsecuredtelephonelines. PAGC also encourages written complaints containinginformation on corrupt behavior of particular governmentofficials, which it then investigates. DPWH has a policy ofplacingprojectbillboards to informthepublicaboutspecificconstruction projects in conspicuous places at constructionsites,providingaphonenumberor locationwhereconcernsabouttheprojectmaybereported.

�32. Code of Conduct. The Code of Conduct and Ethical

Standards for Public Officials and Employees issued in

November1989providesfornormsofconductandspecifies

prohibitedactsandtransactionsonthepartofpublicofficials,

includingthose involvedinpublicfinancialmanagementand

procurement.TheCodedefinesaccountabilitiesandfinancial

disclosure. Compliance with this Code is obligatory, with

administrativeorcriminalconsequencesfornon-compliance.

�33. Public Perception Survey on Procurement Corruption. Despite the adequacy of the anti-corruption laws and

regulationsandthepresenceofanti-corruptionagencies,the

publicperceptionofcorruptionishigh.The2006SWSsurvey

on the GOP’s procurement system revealed that the public

perceives the levelof corruption ingovernment contracts to

bethesameasitwasfiveyearsago,aboutthesametimethat

theGPRAwaspassed.TheSWSsurveyalsofoundthatonly13

percentoftherespondentswereawareoftheGPRA.About35

percentofmorethan700Filipinofirmssurveyedinthe2004

WB/ADBInvestmentClimateSurveyreportedcorruptionasa

majorconstraint indoingbusiness in thePhilippines, second

only to macroeconomic instability. The recently published

October 2007 World Governance Indicator reported that

the control of corruption is lower in the Philippines than in

comparableEastAsianeconomies.

�34. Optimism for the GPRA. Despite the low awarenessratings and continuing negative public perception ofgovernmentbiddings,tworesultsfromthe2006SWSsurveyprovide encouraging signs that the public is willing to help.A large majority (76 percent) believe that the GPRA canhelp reduce corruption in government contracts. Amongthe 13 percent who are aware of the GPRA, 87 percent ofthembelievethat itcanhelpreducegovernmentcorruption.Significantly, the survey indicated that 73 to 77 percent ofFilipinosagreewiththereformmeasures incorporated intheGPRA, with 42 to 49 percent saying that these reforms aredefinitelyneeded.Further,42percentofthosewhowereaware

of theGPRAthought it isnoweasier topunishgovernmentofficialsresponsiblefor irregularities ingovernmentcontractscompared to aboutfive years ago.A largeproportionof allrespondents(55percent)saidthattheywouldreportincidentsofcorruptiontothemedia,andnearlyasmany(46percent)said it was important for people to know the procurementreformlawsandregulations.Morethan40percentarewillingto join a citizens’ group or a CSO to monitor governmentbidding procedures. And 23 percent said they will refuse tovoteforcorruptpoliticians.Annex 4providesasummaryoftheSWSsurveyresults.

�35. Desired Impact for the Strategic Communication Plan. ThechallengeistodevelopaninformedbeliefthattheGPRAisnotonlyintendedtoworkagainstcorruption,butthatit trulydoes so. Theobjective is to changebehavior so thatcitizensbecomemorevigilantandlesstolerantofcorruption,private sector bidders come to respect the integrity of theprocurementsystem,andpublicprocurementofficials followthe lawand regulations for the sakeofgoodpublic service.Regular publication of the results of audit and monitoringwould document that procurement reform is indeed beingimplementedsuccessfully.ThisisthedesiredimpactofGPPB’sproposedStrategicCommunicationPlan.However,whiletheGovernment has allotted some funds from its own budget,it isnotenoughfornationwide roll-out.Recommendation: Adequate resources should be provided for the Strategic Communication Plan in MDB projects as part of technical assistance for capacity building. One way of implementing the Plan to the subnational levels would be to support activities sponsored by the powerful university network, Knowledge for Development Centers, who have a high level of interest in procurement reform and have already requested information with the objective of organizing procurement training at local level Public Information Centers.

Result of the BLI Assessment 136. The above findings support the BLI assessment results.TheGPRA’slegalandregulatoryframeworkonanticorruptionfullyachievesbestpracticestandards.Thelegalandregulatory

The 2006 SWS survey on the GOP’s procurement system revealed that the public perceives the level of corruption in government contracts to be the same as it was five years ago, about the same time that the GPRA was passed.

44

Adequate resources should be provided for the Stretegic Communication Plan in MDB projects as part of technical assistance for capacity building. One way of implementing the Plan to the subnational levels would beto support activities sponsored by the powerful university network,Knowledge for Development Centers.

systems define the responsibilities, accountabilities andpenalties for individuals and firms found to have engagedin fraudulent or corruption practices. However, evidence ofenforcementisfewandfarbetween.Thefullimpactofexistingmeasuresisnotyetachievedbecausethesemeasuresarenotyet fully integratedacrossanti-corruptionagencies toensurecoordinated action and prevent overlapping and conflictingactions. There are several CSOs working as observers anddialoguewiththeGOPisfrequent,buteffortssofarhavehadlimited impact. There are mechanisms in place for reportingfraudulent,corrupt,orunethicalbehavior,buttheiraccessibilityandreliabilityundermineandlimittheirusebythepublic.Thereisacodeofethicsforpublicservantswithadministrative,civilandcriminalpenaltiesfornon-compliance.Table14providesasummaryofthesefindings.

137.TheCPARWorkingGroupandtheWBCPARTeamhavethoroughly analyzed the obvious inconsistency between theBLI Ratings and the prevailing public perception of a highlevelofcorruption inprocurementandwith theSWSsurveyfindingsthatonly13percentofthepublicisawareofthenewprocurementlawanditsintendedbenefits.Theinconsistencymakesbettersensewhenviewedalongsidetheparadoxfromwhichitstems:muchprogresshasbeenmadeinprocurement

reform in termsof rulesandregulationsbut implementation

andenforcementarestillweak,andtheobjectivesofthereform

have not been fully achieved. Mindful of the contradictions

Table �4: Summary of Scores for Indicator �2, Pillar IV

Sub-Indicators Score Max. Score12(a)–Thelegalandregulatoryframeworkforprocurement,including tenderandcontractdocuments,includesprovisionsaddressingcorruption, fraud,conflictofinterest,andunethicalbehaviorandsetsout (eitherdirectlyorbyreferencetootherlaws)theactionsthatcanbe takenwithregardtosuchbehavior 3 312(b)–Thelegalsystemdefinesresponsibilities,accountabilities,and penaltiesforindividualsandfirmsfoundtohaveengagedin fraudulentorcorruptpractices 3 312(c)–Evidenceofenforcementofrulingsandpenaltiesexists 2 312(d)–Specialmeasuresexisttopreventanddetectfraudandcorruption inpublicprocurement 2 312(e)–Stakeholders(privatesector,civilsociety,andultimatebeneficiaries ofprocurement/end-users)supportthecreationofaprocurement marketknownforitsintegrityandethicalbehaviors 2 312(f)–Thecountryshouldhaveinplaceasecuremechanismforreporting fraudulent,corrupt,orunethicalbehavior 2 312(g)–ExistenceofCodesofConduct/CodesofEthicsforparticipants thatareinvolvedinaspectsofthepublicfinancialmanagement systemsthatalsoprovidefordisclosureforthoseindecisionmakingpositions 3 3Totalscore 17 21

Rating: 17/21 or 80%; Level of achievement is Substantially Achieved.

inherentinthecurrentsituation,theWorkingGroupandCPAR

Teamcarefullyreviewedtheratingsofthesub-indicatorsand

ratedthemconservatively.Onereasonforthehighratingisthat

theindicatorfocusedonprocessandnotonresults.Itwould

havebeendifferentifsomesub-indicatorsonenforcementand

resultingoutcomeshadbeenincluded.

45

Building Roads to ProsperityAn 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, includingRoad 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 inthe bidding process, a demonstration of transparency in the public procurement system.

46

138. Combining the levels of achievement against BLIinternationalstandardfor thefourkey resultareasorPillars,thePhilippinepublicprocurementsystemisratedasmediumormoderaterisk,basedonthefollowing:

Pillar I: Legislative and Regulatory Framework scored 86percentofbaseline(fullachievement),Lowrisk;Pillar II:InstitutionalFrameworkandManagementCapacityscored 69 percent of baseline (substantial achievement),MediumorModeraterisk;Pillar III:ProcurementOperationsandPublicProcurementMarketPerformancescored53percentofbaseline(partialachievement),Highrisk;andPillar IV: Integrity and Transparency of the PublicProcurement System, scored 68 percent of baseline(substantialachievement),MediumorModeraterisk.

InFigure1,comparingthecountryscore(whiteinnerdiamond)

toaperfectscore(blackouterdiamond),indicatesataglance

III. COUNTRY RISK ASSESMENT

the status of the country’s public procurement systems as

comparedwithinternationalstandards.

�39. Risk Analysis. While the GPRA appeared to have

substantiallymetthebaselinesforagoodprocurementlegaland

regulatoryframework,anumberofrisksintheimplementation

andenforcementofthelawremain.Theprivatesectorisnot

yet confidentofa levelplayingfield,althoughmeasuresare

nowinplacetoaddresstheissuefromthenationaltothesub-

nationalgovernmentlevel.Thereareindicationsthatsomeof

the bidders are cornering markets or colluding to win bids.

Procurement monitoring and collection of data to evaluate

performancearenotyetfullyinplaceasthePhilGEPSisnotyet

fullyimplementedandcomplianceisnotyetatasatisfactory

level. The law is being enforced and violators punished by

several anti-corruption bodies that are not fully coordinated

inorder toensure successful enforcement.The sustainability

The Legislative and Regulatory Framework

IRR-B Foreign Assisted ProjectsInternational CompetitivePi

llar

I

Institutional Frameworkand Management Capacity

Follow-thru in Compliance Monitoring-Improve Compliance-Generation and Analysis of Data Linkage

Pilla

r IIThe Integrity and

Transparency of the PublicProcurement System

Internal Audit Role of ObserversPhilGEPS as transparency tool

Pilla

r IV

Procurement Operations and Public Procurement Market Performance

ProfessionalizationRecord KeepingPrivate Sector OwnershipPi

llar

III

Figure 1. Graphical Representation of the BLI Pillars for the Philippine Public Procurement Systems in 2006

Maximum Score

2006 Country Score

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2006 Assessment of the Philippine Procurement System

47

oftheCSOinvolvementasobserversinthebiddingprocessis

anissue.Overall,thepublicawarenessonthelawisverylow

at13%,andthiswasanalyzedasduetopoorcommunication

of the reformdownto thegrassroots level. While the legal

framework has been strengthened, implementation and

enforcementareweak.Againstthisbackdrop,theCPARusing

Sustainability of the CSO involvement as observersin the bidding process isan issue. Overall, the public awareness on the law is very low at 13%, and this was analyzed as due to poor communication of the reform down to the grassroots level.

theOECD-DAC12BLIindicatorscameupwithanaggregate

BLI score of 67 percent at the country level. This would

translatetoaMediumriskforthenationalagenciesandHigh

riskforLGUs’procurementasshowninTable15.

140. Mitigating the Risk. At the country level, the CPAR

Working Group included risk-mitigating activities in a

comprehensiveActionPlantoImprovethePublicProcurement

System,presentedinthelastchapterofthisreport.Measures

intendedtomitigatethecountryprocurementriskinforeign-

assistedprojectsfinancedby loansandgrantsareaddressed

in theprocurementarrangements for theseprojectsandare

presentedinthenextchapter.TheyincludetheuseofPhilippine

countrysystemsthroughtheadoptionofharmonizedbidding

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

by development partners indicated in the Proposed Action

Plan. Specific project procurement risk will be based on the

projectcapacityassessmentnormallyconductedduringproject

preparation.Moreover,ananti-corruptionplanonprocurement

isnormallydiscussedandagreedwiththeimplementingagency

andincorporatedintheLoanAgreement.

48

INDICATOR

1.Presenceanduseoflegaland regulatoryinstrumentfromhighest leveldowntodetailedregulationand biddingdocuments

2.Existence,availability andqualityofimplementing regulationsanddocumentation3.Procurementmainstreamedintothe publicsectorgovernancesystem

4.Presenceofafunctionaland normative/regulatorybody

5.Existenceofinstitutionaldevelopment capacity

6.Operationaleffectivenessand efficiencyofthesystematthe entitylevel

7.Positivemarketresponseto procurementsolicitations

8.Existenceofcontractadministration anddisputeresolution

9.Existenceofeffectivecontroland auditsystem

10.Efficientappealmechanism

11.Accesstoinformation

12.Presenceofethicsandanti- corruptionmeasures

CountryAverage

L

L

M

L

H

H

H

M

H

H

M

M

M

L

M

M

L

H

H

H

H

H

H

H

M

H

MITIGATING MEASURES

FormulateIRR-Btocoverforeignassisted

procurement.

SimplifiedBarangayandLGUbiddingdocumentsandmanualswillbedevelopedandimplemented.

Developmentandissuanceofclearguidelinesonmulti-yearplanlinkedtoannualbudget,andPFMmanual.

ProvidemoreresourcestoGPPB-TSOforanexpandedrole.

Strengthenmonitoringandevaluationperformance;developPhilGEPSPhases2to5;acceleratetheprofessionalizationprogram;upgradethequalityoftrainingforprocurementandprocurementaudit

Establishandimplementarecordsmanagementsystem;deepenCSOsandprivatesectorawarenessandinvolvementinthesystem.

Conductregularprivatesectortrainingonprocurement;strengthentrain-the-trainersprogram;upgradethecostestimatingprocess;reduceeligibilityrequirementstocompriseonlytechnicalandfinancialcapacity.

Monitorprogressofdisputeresolutioncases;strengthencontractimplementationmonitoringbyCSOs.

Establishacovenantofcoordinationamongoversightagencies;mainstreaminternalcontrolandinternalauditsysteminentities.

Studythecreationofanindependentadministrativereviewbody;publishresolutionofcomplaintsdecidedbyheadsofentities.

Implementthestrategiccommunicationplan.

Establishacovenantofcoordinationamonganti-corruptionbodies;developadatabaseonfraudcases;conductspecialtrainingprogramsonfrauddetection;developamechanismtofollow-upreportedirregularitiesbyCSOobservers.

Table �5: Level of Risk Per Indicator

Level of Risk

Nat’l LGUACHIEVEMENTLEVEL

SA–75%

FA–100%

SA–75%

FA–92%

PA–42%

PA–42%

PA–44%

SA–78%

PA–53%

PA–60%

SA–67%

SA–80%

67%

49

Empowering Young People through KnowledgeCollege students are trained to monitor government procurement by accessing on-line thePhilippine Government Electronic Procurement System (PhilGEPS) and reporting perceived anomalies to partner government agencies and civil society groups.

50

Legal Basis141.Section3(ScopeandApplication)oftheGPRAprovides

that“[T]hisActshallapplytotheprocurementofinfrastructure

projects, goods and consulting services, regardlessof source

of funds, whether local or foreign by all branches and

instrumentalitiesofgovernment….Anytreatyorinternational

or executive agreement affecting the subject matter of this

Act to which the Philippine government is a signatory shall

be observed.” Therefore procurement based on a treaty

or international or executive agreement will follow the

procurementproceduresspecifiedinthetreatyoragreement.

ThequestionofwhetherJBIC,ADB,andWBloanagreements

shouldbeconsideredastreatiesorinternationalorexecutive

agreementswasbroughtbeforetheSupremeCourt,andon

June8,2007,theCourtruledthatsuchloanagreementsdo

indeed partake the nature of an executive or international

IV. Foreign-Assisted Projects

agreementwithinthepurviewofSection4oftheGPRA.Onthis

basis,theSupremeCourtstatedthattheMDB’sprocurement

guidelinesagreeduponintheloanorgrantagreementhave

primacyontheconductand implementationof thebidding/

procurementprocessforforeign-assistedprojects.

Harmonization142.InJanuary2003,theGOPanditsdevelopmentpartners,

particularly ADB, JBIC and the WB, agreed to harmonize

six procurement areas in order to reduce transaction costs,

simplify procedures, facilitate decision-making and reduce

capacity-buildingcostsforforeign-assistedcontracts.TheWB’s

move towards further relianceonPhilippinecountry systems

will depend largely on completion of these harmonization

activities.Sincethen,fourofthesixareashavebeencompleted

orareunderway,asshowninTable16.

AREA

1.ImplementingRulesandRegulations

2.Biddingdocumentsforworks,goods

andconsultingservices.

3.Trainingandcertificationprogram

4.Procurementmanual

5.Procurementreportingformat

6.Registrationandlicensingprocedures

witheligibilityscreening.

Table �6: Update on Harmonization Activities for GOP

Expected Completion Date

December2009

Done

December2008

Done

Done

Nottobedone

UPDATE AS OF JUNE 30, 2007

IRR-Aissuedfordomesticfundedcontractsin

September2003.Foreign-assistedprojectsare

coveredbySection4oftheGPRAandSection6of

theHarmonizedGPMs.IRR-Bagreedtobedrafted

andissued.

PBDsissuedinAugust2004.WorksandGoods

DocumentsharmonizedwithADB,JBICandWorld

Bank.ConsultingServiceharmonizedwithWB.

Includedintheprofessionalizationstudy

GPMissuedinJuly2006.Mandatoryadoptionin

January2007.

IncludedaspartoftheGPM.

ItwasagreedtopursuethisbetweenDPWHand

CIAP/PCAB,withoutMDBinvolvement.

Funding Support

USAIDand

WB-IDF

WB

WB-IDF

USAIDand

ASEM2Grant

ASEM2Grant

5�

Regulations�43.Implementing Rules and Regulations B.Whileforthe

pastfouryearsMDB-fundedprojectshavebeensatisfactorily

implementedonthebasisofSection4oftheGPRAandSection

5of theGPMs, therearealsoprojects thatare fundedfrom

bilateral and other sources. In view of recent controversies,

therearenowrequestsfromvarioussectorstoincludeinthe

harmonization activities, the drafting of the IRR-B to cover

exclusivelyprocurementunderforeign-assistedprojects,which

willincludenotonlytheODAfromtheMDBs,butalsothose

frombilateral sources,asprovidedfor inSection1of IRR-A:

“[T]heIRR-Bforforeignfundedprocurementactivitiesshallbe

the subject of a subsequent issuance.” The proposed CPAR

ActionPlanincludesthedrafting,finalizationandissuanceof

IRR-B.

Bidding Documents�44. Philippine Bidding Documents as Harmonized with ADB, JBIC and WB.Thecountry’sProcurementHarmonization

Programtookabig leap forwardwith the issuanceofGPPB

Resolutions in August 2004 and January 2005, requiring

mandatoryuseofthePBDsforWorksandGoodsasharmonized

withADB,JBICandWBforNCBmethod,andforConsulting

Servicesasharmonizedwith theWB.Themandatoryuseof

thedocumentsnationwidebyallprocuringentitiesstartingin

June2005isenforceablebylawbasedonSection6andArticle

VIoftheGPRA.Fromthefirstidentificationofconflictingrules

for each document, to workshops and discussion meetings,

and then to final compromises to harmonize the conflicting

rules,ittook19monthstofinishtheFirstEditionofthePBDs,

whichthenbecamethefirstharmonizedbiddingdocuments

issuedwithintheEastAsiaandPacificRegion.Themagnitude

ofthisachievementisdocumentedinTable17.

�45. Assessment of the Effectiveness of the Harmonized Philippine Bidding Documents. The August 2004 FirstEdition of the Harmonized PBDs was updated in a SecondEdition in May 2005. The MDBs prescribed the use of theharmonizedPBDs forNCB in all projects, effectiveupon theissuanceoftheJointLetterfromtheMDBsadvisingtheGPPBof its acceptability in May 2004. Since then, procurementarrangements with NCB method automatically prescribe the

useofHarmonizedPBDsand theSUCsuse theHarmonizedPBDsasthematerialsfortrainingonbiddocumentpreparation.The use of the same document by the GOP for its publicbiddingandbytheMDBsfortheirNCBshasfacilitatedtrainingand reduced, if not eliminated, confusion in the applicationoftheprocurementrules.However,challengeshaveariseninimplementingPBDuseintheregions,districtsandtheLGUs,where thedocumentswere found tobe too comprehensiveandtheprocedurestootediousforsmalllocalprocurements.SimplifiedPBDsforsmallprocurementsuptocertainthresholdsarebeingdevelopedandwillbeharmonizedwithMDBspriortonationwideroll-out.

Procurement Manuals�46.Harmonization of the GPM.ThedevelopmentoftheGPMsprovidedtheopportunitytoharmonizepreviousmultipleprocurementguidelinesandmandatethisonestandardseriesof manuals to be used by all agencies and entities. Prior tothe issuance of the GPMs, a number of large procuringentities had their own internal procurement guidelines andprocedures, others used a compendium or compilation ofprocurement-related issuances, and every WB project had aseparateprocurementmanualthatwasannexedtotheProjectOperations Manual. Procurement practitioners in agencieslike DENR, DepEd, DOH and DPWH were referring to twoor more procurement manuals, which could be inconsistentand confusing. The process of manual harmonization lastedayear—fromMay2004toMay2005—includingpilottestingtheGPMsinsixnationalagencies,oneGOCC,andoneLGU.The harmonized GPMs were declared acceptable for use inMDB-financedprojectsthroughajointletterdatedSeptember14,2006,signedbythecountrydirectorsandrepresentativesofADB,JBICandWB.ItbecameeffectiveformandatoryusestartingJanuary2007.

147.Whileitwouldbeprematuretomeasuretheeffectivenessof the Harmonized GPMs, the following outcomes areexpected:

•HavingasinglesetofGPMsfacilitatesoperationalactions

fortherulesmandatedintheGPRAanditsIRR-A,which

includestheMDB-fundedprojects.

•TheGPMsprovideaveryinformativereferenceandguide

topublicprocurementpractitionersandadministrative

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%

Table �7: Number of Conflicting Paragraphs in the PBDs

52

staff,includingtheheadoftheprocuringentity.

•Theyprovideacleardefinitionofroles,responsibilities,and

accountabilitiesintheprocurementprocess.

•Theyserveasthesoleprocurementdocumentspecifying

controlmeasurestobeusedasauthoritativereference

intheirregularorspecialauditsbyinternalandexternal

auditors.

AnassessmentontheeffectivenessoftheharmonizedGPMs

shouldbeconductedafterayearofmandatoryadoption.

Acceptable Private and Commercial Practices148.Procurementpracticesintheprivatesectorgenerallyadopt

competitivemethods, usually via the Internet since the June

2000passageoftheE-CommerceLaw(RA8792).Commercial

firmsmakeuseofBayantrade, aprivately runenterprise for

onlinee-procurementofgoodsandservicesthatcompetitively

selects the lowest complying offers, and of the suki or

accreditation/registration system, where companies list their

preferredsuppliers,contractorsandserviceprovidersingood

standing,andsolicitcompetitionfromthoselisted.Company

policymayalso require them tobuydirectly from theirown

affiliatedorsubsidiarycompanies,whichisnotcompetitivebut

keepsprofitswithinthecompany.Inthelattercase,theBank

willnotacceptthepracticeasitconnotesconflictofinterest,

exceptwhenthesubsidiarycompanyactsasprocurementarm

andtheprocessundertakeniseconomicandefficient.

NCB Procurement Annex to the Loan Agreement�49. Remaining Differences from WB Rules. Prior to the

issuance of the Harmonized PBDs and GPMs, the WB Loan

Agreement Annex to the Procurement Schedule for WB-

financed projects in the Philippines identified 27 national

procurementrulesforWorksandGoodsandsixforConsulting

Servicesasunacceptabledue tonon-conformancewithbest

practices.Whileharmonizationhasnotyetresolved100percent

ofthesedifferences,ithasdrasticallyreducedthenumberof

non-conformingrulesfrom27forWorksandGoodsto8or

by70percent.Thisreductionwasachievedbycomparingthe

nationalrulesagainsttheChecklistofAcceptableRuleswhich

wasissuedasAnnexAoftheMay2002WBCPARGuidelines,

taking into consideration implementation experience during

2000-02. Following this comparison, the revised NCB

Procurement Annex to the loan agreement is proposed to

be changed to reflect an updated list of unacceptable rules

as shown Annex 8A. As the CPAR was carried out in close

collaboration with the ADB, ADB’s National Competitive

Bbiddingannextotheirprocurementplanisalsoprovidedas

Annex8.Harmonizationwillcontinue,andexperienceduring

thefirstyear’suseofthedocumentswillopenfurtheravenues

forgreaterharmonization.

Procurement Method Threshold�50. Thresholds per Contract for Procurement Methods. Progress in harmonization between the GOP and its

development partners is considered to have been successful

because it has resulted in closer alignment of country and

MDBsystems.The reduction in thenumberofunacceptable

ruleshasresultedinagreaterrelianceoncountrysystems.The

first step towards this outcome was the passage of a good

legislativeandregulatoryframeworkthatpromotedtheuseof

acceptable tools and procedures: the procurement manuals,

thebiddingdocumentsandforms,thee-procurementsystem,

and the national training program for NCB. However, this

CPARhaspointedtohighriskintheareaoftheinstitutional

capacityandoperations in themarketplace, inparticular: (a)

implementation, monitoring and enforcement; (b) capacity

building;and(c)linkagetopublicfinancialmanagement.The

adoptionofharmonizedrulesandthegreateruseofcountry

systemsistoorecentfortheirfullimpacttobecomprehensively

assessed.Inthisregard,theWB’sandADB’sfiduciarythresholds

areshowninTable18.

Anti-Corruption Measures in WB Projects151. It is often said that the issue of governance in the

Philippinespresentsaparadox.There isastrongpresenceof

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,

corruption remains a critical barrier to the achievement

of good governance. Governance indicators from a cross-

countrydatabaseindicatethat,despitedemocraticprocesses,

indicatorsfortheruleoflaw,politicalstability,andcontrolof

corruptionarelowerinthePhilippinesthanincomparableEast

Asian economies. Additionally, about 35 percent of Filipino

firmssurveyedinthe2004ADB/WBInvestmentClimateSurvey

reported corruption as a major constraint to doing business

in the Philippines, secondonly tomacroeconomic instability.

Corruption and collusion, particularly in procurement, also

pose significant challenges for government expenditures,

includingthosefinancedbytheWB.It isthereforenecessary

for the WB to know how the Government is responding to

procurement corruption and what specific strategies the

programhasemployedtohelpmitigatetheriskofcorruption

inprocurement.

152. Project Appraisal Documents for projects in the WB

portfolioforthePhilippinesthatwereapprovedstartinginFY

2007havethereforeincludedananti-corruptionactionplanas

partof theWB’sfiduciaryresponsibility.Oncediscussedwith

theimplementingagency,themeasuresareincorporatedinto

the agency’s customized procurement manual or operation

manual and are referenced in the loan or grant agreement.

While each project will have its own implementation set-up

andanti-corruptionplan,itwouldbehelpfultohaveaguide

for theassessmentandpreparationofanti-corruptionaction

plans for procurement. Recommendation: A procurement anti-corruption guide or manual specific to the Philippines’ public procurement system should be developed by the WB Procurement Team to assist project procurement specialists and task team members during project preparation. Once cleared by the Regional Procurement Manager, the anti-corruption guide or manual would be issued as a country directive for the preparation of procurement arrangements for new WB projects in the Philippines.

153. The anti-corruption plan would consolidate the anti-

corruption initiativesmentioned intheCPARandwouldalso

incorporatetheWB’sGACstrategy,including:

(a) mandatory adoption of PhilGEPS and its user guide under NCB once these have been successfully piloted and assessed by the WB and ADB;(b) customization of the Generic Procurement Manual for implementing agencies and for LGUs;(c) the strict use of bidding documents and contract forms; (d) the application of fraud and corruption policies of the Government and WB; (e) the involvement of civil society organizations as observers in the bidding process, as mandated by law, and as observers in contract implementation.

A country-specific action plan for mitigating risks identified in the capacity assessment of the implementing agencies would become the basis for discussion with the agency and borrower in finalizing the project-specific procurement anti-corruption plan.

Use of Philippines Country System154. The2003ParisDeclarationemphasizes the importance

of strong procurement and financial management systems

in enabling more and better support from development

partners. As a signatory of the Declaration, the GOP has

stronglycommittedtoimprovingdevelopmenteffectivenessin

several areas, including the alignment andharmonizationof

procurementsystems.TheframeworkofthePhilippinespublic

procurementsystemisnowcloselyalignedwithinternational

bestpractices, resultingfromtheharmonizationof thebasic

tools forprocurement: (a) a lawand its implementing rules,

which contain most of the best features of international

procurement principles and standards, as suggested by

internationalexperts;(b)PBDsharmonizedwithADB,JBICand

theWB; (c)GPMsharmonizedwithADB, JBIC and theWB;

(d)acceptabilityoftheelectronicprocurementsystemforuse

inMDB-fundedprocurement;and(e)jointdeliveryoftrainingprograms.

155. The results and impacts of these aligned activities in

MDBprojectsare:(a)increasedthresholdsforlocalornational

competitivebiddingmethods;(b)reduceddifferencesinrules

for public bidding that are indicated in the NCB Annex to

the loan agreement, making it easier to attain procurement

proficiencyregardlessoffundingsource;(c)useofharmonized

bidding documents that facilitate the work of bidders,

procurement staff, members of the BAC, and auditors; (d)

streamlined processes as a result of the adoption of GPMs

thatapplytoallprojectsregardlessoffundingsource;and(e)

Governance in the Philippines presents a paradox. While there is a strong presence of civil society, an open media and highly capable individuals in public administration, corruption remains a critical barrier to achieving goodgovernance.

54

strengthenedmonitoringofcompliancethroughtheuseofe-

procurement resulting from theacceptabilityof PhilGEPS for

MDBprojects.Theharmonizationshortensthelearningcurve

for new procurement practitioners and enables auditors to

pinpointthoseaccountableateachprocurementstep.

156. Given these advances, all procurement arrangements

in WB-assisted projects as recorded in the Project Appraisal

Documentwillprovidefor:

•theloanagreementtocontaintherevisedNCBProcurement

AnnexasshowninAnnex7tothisCPAR;

•jointprocurementcapacityassessmentusingprimarilythe

As a signatory of theParis Declaration, the GOP has strongly committed to improving development effectiveness in several areas, includingthe alignment and harmonization of procurement systems.

GPPB’sagencyprocurementperformanceindicator(APPI)

systemtoarriveatajointriskratingandintegratedmeasures

toimprovethecapacityoftheprocuringentity;

•theuseoftheHarmonizedPBDsforGoodsandWorks;

•theuseoftheHarmonizedGPMsaspartoftheproject

operationmanual.TheGPMmaybecustomizedtobe

specifictotheorganizationalandoperationalneedsofthe

procuringentity,subjecttotheapprovaloftheGPPB;

•theuseofPhilGEPSastheprimarysourceofprocurement

information,particularlyinadvertisingforinvitationtobid

andpostingofawards;

•jointprocurementtrainingprogramsforNCB,the

procurementdocuments,formsandmanuals,and

alternativemethods;and

•theadoptionofanti-corruptionmeasuresinprocurement

basedonaprocurementcapacityassessmentofthe

implementingagencyandtheresultingprocurement

fiduciaryarrangements.Theanti-corruptionmeasures

willincorporateestablishedanti-corruptionmeasuresof

theGovernment,includingtheparticipationofCSO

andprivatesectorobserversduringthebiddingand

contractimplementationstages.

55

Empowering Poor CommunitiesThe 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 OfficialDevelopment Assistance projects in the country.

56

157. The Proposed Action Plan to Improve the Public

Procurement System shown on the following pages was

developedbytheCPARWorkingGroupfromtheBLIexercise

at the Canyon Woods Workshop in Batangas, Philippines,

held in May 2007. The matrix of the proposed action plan

incorporates the agreed recommendations of the CWG,

indicates the responsibleagencies andentities, andprovides

for timelines to accomplish the action. The plan takes into

accountachievementsandongoingactionsthatwereagreed

during the secondupdateof the2002CPARand that have

been monitored since that update, carried out in 2005 (see

Annex 9.)

158. Inviewofscarceresourcesandlimitedcapacity,theCWG

prioritized the key result areas as follows: (a) implementing

the strategic communication plan; (b) strengthening of

monitoringandenforcementinstitutionsandmechanisms;(c)

strengtheningofcapacityonprocurement; (d) improvements

in procurement processes and procedures; (e) enhancing

linkages between financial management and procurement;

and(f)developmentofcomplaintandreviewmechanismsfor

procurementrelateddisputes.Thespecificactionsincludedin

theActionPlanwerepresentedtothePDFWorkingGroupon

GovernanceandAnti-Corruptionin itsmeetingofAugust2,

2007.ThePDFSub-WorkingGrouponProcurementaccepted

the handling of the implementation of the activities in the

ActionPlaninitsmeetingofSeptember12,2007.

V. Action Plan

In view of scarce resources and limited capacity, the CWG prioritized the key result areas as follows: (a) implementing the strategic communication plan; (b) strengthening of monitoring and enforcement institutions and mechanisms; (c) strengthening of capacity on procurement; (d) improvements in procurement processes and procedures; (e) enhancing linkages between financial management and procurement; and (f) development of complaint and review mechanisms for procurement related disputes.

57

KEY RESULT AREA

I. Communications Strategy

II. Strengthening of Monitoring

and Enforcement Institutions

and Mechanisms

Action Plan for Philippine Public Procurement System

RECOMMENDED ACTION/MEASURE

a.DevelopandImplementStrategicCommunicationPlan forProcurementReform

b.Formulateadisclosurepolicyonprocurementrelated information

a.Establishacovenantamongoversightagencies(GPPB, COA,PAGC,DBM,OMB)tostrengthencoordinative linkagesonmonitoringandenforcementofaudit findings,andcompliancewiththeprocurementlaws, andsupportedbythecreationofaprocurement sub-workinggroupunderthePDFgovernanceand anti- corruptionprogram

b.Establishandoperationalizearecordsmanagement systemforprocurementandcontractmanagement transactions.Replicatecurrentgoodpracticessystems (costestimationprocess,documenttracking)

c.Completeandmainstreaminternalcontrolsystems forallgovernmentagencies

d.Implementphases2to5ofPhilGEPS

e.DevelopDatabaseonProcurement-RelatedFraudCases

f.Developandstrengthenfeedbackorprocurement

monitoringsystemattheagencyandnationallevels

g.Developsystemsfortheanalysisofprocurement-related

informationandlinkagewithothergovernment-related

databasesforpolicy-makinganddecision-making

purposes

BLI INDICATOR

11a)

11(a)

8(c),9(b),12(d)

6(c)

9(c)

4(c),5(b)

8(c),12(c)

5(b)

5(b)

58

SPECIFIC WEAKNESSES

Lackofacommunicationplanfordisseminationofinformationonprocurementreform

Absenceofpolicyontheprotectionand/ordisclosureofproprietary,commercial,personalorfinancialinformationofacommercialandsensitivenaturerelatedtoprocurement.

Weakmonitoringofoutcomesofdisputeresolutioncases.Complianceofonlyfewagencieswiththeinternalcontrolprocedures.Theanticorruptionprogramrequiresbettercoordinationatahigherlevelandtherearenospecialmeasurestopreventanddetectfraudandcorruptioninpublicprocurement.

Lackofestablishednormsforthesafekeepingofrecordsanddocumentsrelatedtoprocurementtransactionsandcontractmanagementthatmustbekeptattheoperationallevel.

Althoughtherearewrittenstandardsfortheinternalcontrols,thereisnoperiodicreportingtomanagementtoensurecompliancewiththestandards.

Lackofcompliancewithrequirementtosubmitprocurementinformation.Feedbackmechanismhasnotbeenestablishedtomonitorprocurementactivities.

Lackofprocedurestomonitoroutcomesofdisputeresolutioncases.Thereisnoorganizedinformationonthenumberofgraft-relatedcasesfiled,prosecutedandresolved.

Lackofcompliancewithrequirementtosubmit

procurementinformation.Feedbackmechanism

hasnotbeenestablishedtomonitorprocurement

activities.

Lackofanalysisofprocurementinformation

carriedoutonanationalscale.

RESPONSIBLEENTITY

GPPB

GPPB,TAN

GPPB,COA,PAGC,DBM,OMB

GPPB,COA

PAGC,DBM

PhilGEPS,PS,GPPB

GPPB,COA,PAGC,DBM,OMB

GPPB,InternalAudit

Units,Procurement

Units,CSO

GPPB,InternalAudit

units,Procurement

units,CSO

FUNDING SOURCE

PossiblefundingtoberaisedbeforethePDFWorkingGrouponGovernanceandAnti-Corruption(GAC)

GOP,raisetoPDFWGonGAC

PossiblefundingtoberaisedbeforethePDFWorkingGrouponGAC

GOP,WB(IDFforInternalAudit-August2007)

WB,AusAID

WBIDFGrantapproved.ADB’sTechnicalAssistanceGrantbeingprocessed.

GOPpossiblefundingtoberaisedbeforethePDFWGGAC

WB(IDFforInternalAudit-

August2007

WB(IDFforInternalAudit-

August2007)

SCHEDULE

June2007-MediumTermDraftPlan

December2010

December2007

December2007

December2007-CompletionofGovernmentInternalAuditManualsJune2008-PilotTestingandCustomizationofManualsStrengthenInternalAuditUnits.

April2008-2011

December2008

December2009

December2009

59

KEY RESULT AREA

III. Strengthening of Capacity

on Procurement

Action Plan for Philippine Public Procurement System

RECOMMENDED ACTION/MEASURE

h.StrengthenorganizationalcapacityofGPPB-TSOtomonitorand

enforceprocurement-relatedlaws

i.Developmechanismforutilization/optimizationofobserver’sreports

a.Pilottheadoptionofvalueengineeringasapolicyforselected

infrastructureprojectscostingoverP50M

b.ImplementtheProfessionalizationProgramonProcurement

includingcostestimationandvalueengineering

c.Conductofregulartrainingprogramsonpublicprocurement

forprivatesectorbidders

d.Developprocurementauditguideandconductofregular

trainingprogramsforexternalauditorsonprocurement

lawsandprocedures

e.Developmanualandtrainingprogramsforthirdparty

observers(CSO)intheprocurementprocess

f.Developandconductspecialtrainingprogramsonfrauddetection

forpurposesofprosecution(target:investigators,prosecutors,

auditors)

g.Developperformancemanagementsystemsforprocurementunit

andstaff

BLI INDICATOR

4(c)

12(f)

1(b),

6(a)

5(c),

6(a)

6(b),7(a),12(d)

5(d),9(e)

6(b)

12(d)

5(d)

SPECIFIC WEAKNESSES

AlthoughtheGPPBdoesnothavetojustifyits

activitiesbeforeCongress,itsfinancialstabilityis

notsecuredbythelegalframework.

Weakcompliancewiththerequirementto

submitobservers’reports;lackofmonitoringof

enforcementoffollow-upactiontaken.

TheMedium-TermPhilippineDevelopmentPlan

providesfortheapplicationofvalueengineering

ininfrastructureprojectstoensurethemostcost-

efficientdesignsandavoidoverpricingofprojects

andthereisaneedtojumpstartsuchapplication

Thereisaneedtodevelopasustainablestrategy

todevelopthecapacityofgovernmentofficialsto

understandandimplementtheprocurementrules

andregulations.

Absenceoforganizedeffortstoaddressthe

capacityofsmallandmediumenterprisesto

encouragetheirparticipationinprocurement

andtohelpnewentriesintoprocurement

marketplace.

Needtostrengthenknowledgeofauditorson

procurement.

Needtoexpandthenetworkofthird-party

observersandstrengthentheircapacityto

participateintheprocurementprocess.

Needtotraininvestigators,prosecutorsand

auditorsonfrauddetection

Needtodefinetheskillsandknowledge

competencyrequirementsforspecialized

procurementjobsandtomonitoragency

compliancewithstandards..

RESPONSIBLEENTITY

DBM

GPPB,OMB,COA

DPWH,DOTC,GPPB

andNEDAInfracom

GPPB

DTI,Phil-GEPS

COA

GPPB,CSO

GPPB,OMB,COA

GPPB,CSC,DBM,

CESB

FUNDING SOURCE

GOP

EU(existing),Possiblefunding

fromTAF

GOP(DPWHandDOTC

budget)

WB(IDFGranton

Professionalization)

GOP,ADB

WB

Possiblefundingtoberaised

beforethePDFWorking

GrouponGAC

Possiblefundingtoberaised

beforethePDFWorking

GrouponGAC

RaisetoPDFWGonGAC

SCHEDULE

December2009

December2007-

Startofpilot-testing

ofselectedGOP

fundedinfrastructure

projects

(DPWH,DOTC,PPA)

December2008-

IssuanceofGuidelines

byNEDA

December2008

January2008-start

training

December

2008–2010

December2008

December2010

60

KEY RESULT AREA

III. Strengthening of Capacity

on Procurement

Action Plan for Philippine Public Procurement System

RECOMMENDED ACTION/MEASURE

h.StrengthenorganizationalcapacityofGPPB-TSOtomonitorand

enforceprocurement-relatedlaws

i.Developmechanismforutilization/optimizationofobserver’sreports

a.Pilottheadoptionofvalueengineeringasapolicyforselected

infrastructureprojectscostingoverP50M

b.ImplementtheProfessionalizationProgramonProcurement

includingcostestimationandvalueengineering

c.Conductofregulartrainingprogramsonpublicprocurement

forprivatesectorbidders

d.Developprocurementauditguideandconductofregular

trainingprogramsforexternalauditorsonprocurement

lawsandprocedures

e.Developmanualandtrainingprogramsforthirdparty

observers(CSO)intheprocurementprocess

f.Developandconductspecialtrainingprogramsonfrauddetection

forpurposesofprosecution(target:investigators,prosecutors,

auditors)

g.Developperformancemanagementsystemsforprocurementunit

andstaff

BLI INDICATOR

4(c)

12(f)

1(b),

6(a)

5(c),

6(a)

6(b),7(a),12(d)

5(d),9(e)

6(b)

12(d)

5(d)

SPECIFIC WEAKNESSES

AlthoughtheGPPBdoesnothavetojustifyits

activitiesbeforeCongress,itsfinancialstabilityis

notsecuredbythelegalframework.

Weakcompliancewiththerequirementto

submitobservers’reports;lackofmonitoringof

enforcementoffollow-upactiontaken.

TheMedium-TermPhilippineDevelopmentPlan

providesfortheapplicationofvalueengineering

ininfrastructureprojectstoensurethemostcost-

efficientdesignsandavoidoverpricingofprojects

andthereisaneedtojumpstartsuchapplication

Thereisaneedtodevelopasustainablestrategy

todevelopthecapacityofgovernmentofficialsto

understandandimplementtheprocurementrules

andregulations.

Absenceoforganizedeffortstoaddressthe

capacityofsmallandmediumenterprisesto

encouragetheirparticipationinprocurement

andtohelpnewentriesintoprocurement

marketplace.

Needtostrengthenknowledgeofauditorson

procurement.

Needtoexpandthenetworkofthird-party

observersandstrengthentheircapacityto

participateintheprocurementprocess.

Needtotraininvestigators,prosecutorsand

auditorsonfrauddetection

Needtodefinetheskillsandknowledge

competencyrequirementsforspecialized

procurementjobsandtomonitoragency

compliancewithstandards..

RESPONSIBLEENTITY

DBM

GPPB,OMB,COA

DPWH,DOTC,GPPB

andNEDAInfracom

GPPB

DTI,Phil-GEPS

COA

GPPB,CSO

GPPB,OMB,COA

GPPB,CSC,DBM,

CESB

FUNDING SOURCE

GOP

EU(existing),Possiblefunding

fromTAF

GOP(DPWHandDOTC

budget)

WB(IDFGranton

Professionalization)

GOP,ADB

WB

Possiblefundingtoberaised

beforethePDFWorking

GrouponGAC

Possiblefundingtoberaised

beforethePDFWorking

GrouponGAC

RaisetoPDFWGonGAC

SCHEDULE

December2009

December2007-

Startofpilot-testing

ofselectedGOP

fundedinfrastructure

projects

(DPWH,DOTC,PPA)

December2008-

IssuanceofGuidelines

byNEDA

December2008

January2008-start

training

December

2008–2010

December2008

December2010

6�

KEY RESULT AREA

IV. Improvements in Procurement

Processes and Procedures

V. Enhancing Linkages Between

Financial Management and

Procurement

VI. Development of Complaint

and Review Mechanisms for

Procurement Related Disputes

Action Plan for Philippine Public Procurement System

RECOMMENDED ACTION/MEASURE

a.Reviewandformulateimplementingrulesandregulations

forforeign-fundedprocurementactivities(IRR-B),including

harmonizationofblacklistingguidelineswithIFIs

b.Reviewandformulateimplementingrulesandregulations

forlocallyfundedspecializedprocurementsforICBincluding

harmonizedbiddingdocuments(IRR-A)(armsandammunition,

pharmaceuticals,informationtechnology)

c.Reviewdetailedengineeringguidelineswithregardtostandards

anddetermineaccountabilityfornon-complianceamong

governmentagenciesandconsultants

d.Streamlineandharmonizelicensingandregistration

proceduresforcivilworks

e.Developprocurementmanuals,standardbiddingdocuments

forLGUsconsistentwithbudgeting,accountingandauditing

procedures

f.Developsimplifiedprocurementguidesforbarangaysconsistent

withfinancialmanagementguidelines

a.Developclearguidelinesformulti-yearcontractsthat

willintegratebudgeting,expenditure,and

procurementprogram

b.Developagenericfinancialmanagementmanualthatincludes

procurementandlogisticsprocesseswithfinancialmanagement

a.Reviewpoliciesandproceduresforprocurement-relatedcomplaints

andappealscovering:

1.Bestpracticesofothercountries

2.Creationofanindependentadministrativereviewbody

3.Tappingofanexistingadministrativebody

withtheappropriatemandate

4.Reasonablenessofamountofprotestfees

b.Developmechanismstopublishdecisionsonprocurementrelated

disputes(ofHOPEonprocurementrelatedprotest)

BLI INDICATOR

1(b)(c)

1(c)

7(a)(b)(c)

1(b)

1(b)

3(a)

3(b),8(a)

1(h),10(e)

10(d)

62

SPECIFIC WEAKNESSES

Lackofimplementingrulesandregulations

governingprocurementofforeign-funded

projects

Thelegalframeworkdoesnotprovideforthe

extensionoftimeframesevenifforeignbidders

areexpectedtocompete.

Lackofimplementingrulesandregulations

andharmonizedbiddocumentsforspecialized

procurements

Someagenciesdonotcomplywithguidelineson

detailedengineeringguidelines

Manyconstraintsinhibitprivatesectoraccessto

theprocurementmarket,suchasdifficultiesin

gettinglicensesandpermits.

Differencesinprocurementpracticesand

operationsoflocalgovernmentunitswerenot

reflectedintheprovisionsoftheexistinglaw.

Barangayofficialssaytheprocurementlaw

maynotbeapplicabletothenatureoftheir

procurements.

Agenciesdonotpreparemulti-yearplansthat

arelinkedtotheannualbudgetprocessortothe

preparationofannualprocurementplans.

Thereisnolinkbetweenfinancialmanagement

systemandtheprocurementsystemtoensure

enforcementoflaw.

Lackofindependentadministrativebodyor

specialcourttoreviewprocurementrelated

complaintsandappeals

Existenceofpoliciesthatdiscouragefilingof

protest(protestfeerequirement)

Decisionsarenotmandatedtobepublishednor

postedinthewebsite.

RESPONSIBLEENTITY

TWG,PDF

GPPB

COA

DTI

GPPB,LGULeagues,

COA,DBM

GPPB,LGULeagues,

COA,DBM

GPPB,DBM

DBM,COA

GPPB

GPPB

FUNDING SOURCE

WB

GOP

WBIDFgrantsupportingCOA

onvariousauditactivities

approved.

ADBHarmonizationTA

ECgrant

WBandADB

GOP

ECGrant

Possiblehiringof

internationalconsultant

tobefundedbytheWorld

Bank

RaisetoPDFWGonGAC

Schedule

Oneyear

June2008-July2009

Baseguidelines

One(1)year

HarmonizationOne(1)year

December2007–

DPWHprojects

Includetheothersin

thelonglistofCOA

December2007

PCABlicensing

December2007

HarmonizationMarch2008

December2008

December2007

December2008

December2008

December2010

63

PeterGianan,DepartmentofScienceandTechnology MariaLourdesBaua,DepartmentofTradeandIndustry IreneoVizmonte,DepartmentofTrade VenancioSantidad,DepartmentofTransportation andCommunication MarkJalandoni,OfficeoftheOmbudsman AdorPaulino,OfficeoftheOmbudsman CyrilRamos,OfficeoftheOmbudsman ConstanciadeGuzman,PresidentialAnti-GraftCommission CharitoAlvarado,PresidentialAnti-GraftCommission ArcadioCuencoJr.,CommissiononAudit RosaClemente,JoeleEayte,PhilGEPS Dr.FiorelloEstuar,PrivateSectorRepresentative Government Procurement Policy Board –Technical Support Office PiaZ.Ruiz SygridPromentilla MariaAgathaSindico CheloAnneCruz MilaManalastas BryanBigalbal DennisLorneNacario LizaVega WarrenPaulNicdao

PARTICIPANTS TO VARIOUS MEETINGS:

Civil Society/Professional Organizations BelSalonga,BarangayForbesPark JoseConcepcion,BarangayForbesPark ErnestoBurdeos,CBCP-LAIKO JoseLugay,CBCP-LAIKO MiaZafra,CBCP-LAIKO EliseoEvangelista,COFILCO AnthonySeptimo,FOCIG DondonParafina,G-Watch NestorMalapajo,Jr.,NAMFREL ManolitoMadrasto,PCA EduardoRamirez,PICE KristineTapiz,RFMFoundation JunioRagragio,DPEM VincentLazatin,TAN KathySantos,CAC

Local Government Organizations HazelBeniza,LCP EdTiongson,LB HonorioAlumno,LMP AlexVillano,LPP JaydeQuiroz,PDF

Private Sector Professional Organizations AlexDacanay,SGV GilGarcia,Sycip,SGV RebeccaSarmenta,SGV OlyAnastasio,Sycip,SGV

Country Champions and Other In-Country Stakeholders UndersecretaryLauraPascua,DBM,Chairperson AssistantDirectorGeneralRubenReinoso(representedby Engr.ElmerDorado),NEDA,Co-Chairperson DirectorEstanislaoGranadosDBM,Vice-Chairperson DepartmentagenciesandobserversoftheGPPBandtheir representatives TheGPPB-TSO,ledbyitsExecutiveDirectorRubyAlvarez Representativesfromtheleaguesofbarangays, municipalities,citiesandprovinces Representativesfromtheprivatesectorprofessional organizations Representativesfromcivilsocietyorganizations

Development Partners: TheWorldBank: CeciliaVales(TaskTeamLeader),DominicAumentado, ReneSd.Manuel,NoelSta.Ines,CeciliaVerzosa, EvelynQuirante Consultants:JoseSyquia,Jr.,SofronioUrsal,Alice Tiongson,CiprianoRavanes,HeidiMendoza, MaricelLopez,RosarioLarracas,DennisSantiago, RobertoDollar

Collaborating Development Partners: ADB:MichielVanderAuwera,RobertRothery, CandiceMcDeigan,GaliaIsmakova,JovenBalbosa JBIC:TakashiBaba,FleridaChan USAID:GilDy-Liacco AusAID:AngusBarnes,JohnAlikpala,RoselaAgcaoili EC:PieterRobben,EmilyMercado,RogerdeBacker UN:EthelCapunoandMyleneCaraig CIDA:LynetteCorcino IOM:MyleneCaraig TAF:StevenRood,MaribelBuenaobra,KyJohnson

Government Procurement Policy Board Membersand Resource Persons ArcadioCuencoJr.,CommissiononAudit RamonBacani,DepartmentofEducation AidaCarpentero,DepartmentofEducation FranciscoDelfin,DepartmentofEnergy Atty.CriseldaFunelas,DepartmentofEnergy LorraineSanchez,DepartmentofFinance AlexanderA.Padilla,DepartmentofHealth CrispinitaValdez,DepartmentofHealth ConnieLiberan,DepartmentofHealth ReynaldoBungubung,DepartmentofInteriorand LocalGovernment MarichelleLim,DepartmentofInteriorandLocalGovernment ErnestoMatibag,DepartmentofNationalDefense AntonioMolano,Jr.,DepartmentofPublicWorksand Highways MarioBravo,DepartmentofScienceandTechnology CarmelitaLlames,DepartmentofScienceandTechnology

Annex �: Composition of the CPAR Working Group

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

PROJECT NAME

2ndNationalRoadImprovementandManagementProgram

BicolPowerRestorationProject

PrivateSectorDevelopmentSupportfortheCalambaLaguna

NorthSouthHighway

NationalSectorSupportforSocialWelfare

LocalGovernmentSupportforPerformanceGrants

LocalGovernmentSupportforRegionalWaterSupply

LightRailTransitLine1SouthExtension

SecondJudicialReformSupportProject

NationalProgramSupportforGovernmentFinancialIntegrated

ManagementInformationSystem

LocalGovernmentSupportforWater(DevelopmentBankofthe

Philippines3)

NationalProgramSupport-ParticipatoryIrrigationDevelopment

Project

ManilaWestWaterNetwork

PartialRiskGuaranteetoPower

DevelopmentPolicyLoan2

NationalProgramSupport-DisasterManagement

PasigRiverUrbanRehabilitation

NationalProgramSupport-AgrarianReform

COST/LOAN (US$M)

232

12.9

140

50

70

50

260

40

10

50

50

125

250

250

30

50

60

BANK BUDGET FUNDED

FY08

P079935

P106262

FY09

P101581

P082144

P097445

P096822

P096821

P105325

P107630

P108904

P088926

P071119

P095375

P101763

FY�0

P108836

P108835

P078252

66

B. World Bank Lending Program

PROJECT NAME

GlobalEnvironmentalFacility-MindanaoRuralDevelopment

Program2-CoastalMarine

EthanolPlantWaste

PrototypeCarbonFund-BurgosWindProject

ManilaBusDispatch

PersistentOrganicPollutantsContaminated

UnintentionalPersistentOrganicPollutantsRelease

ClimateChangeAdaptation

COST/LOAN (US$M)

7

-

-

-

2

10

5

NON-BANK BUDGET FUNDED

FY09

P096836

P106732

P090966

P106260

FY�0

P106890

P106885

P101076

67

Proposed Action Plan for Philippine Public Procurement System

BIS INDICATOR NAME

BLI INDICATOR

DPWH

DEPED

Annex 3: Summary of APPI Assessment Scores for �0 Agencies (as of June 22, 2007)

PILLAR I – The Legislative and Regulatory Framework

BLI

MAJOR CRITERIA BIS INDICATOR NAME INDICATOR

�. Strategy (6%) 1.AgencyProcurement

ReformStrategy(40%) Indicator1 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40%

2.Strategicpolicyinitiativesoutlined

bytheagency(30%) None 1.80% 0.00% 1.80% 0.00% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.44%

3.Key/Strategicprocurement

issues(30%) None 0.00% 0.00% 1.80% 0.00% 1.80% 1.80% 0.00% 1.80% 1.80% 1.80% 1.08%

TotalforStrategy 4.20% 2.40% 6.00% 2.40% 6.00% 6.00% 4.20% 6.00% 6.00% 6.00% 4.92%

PILLAR II – The Central Institutional Framework and Management Capacity

Agency 4.HumanCapital(60%) 5(c) 9.60% 9.60% 0.00% 0.00% 0.00% 0.00% 9.60% 0.00% 0.00% 0.00% 2.88%

Professionalization 5.UseoftheGovernment

Measures (�6%) ProcurementSystem(G-EPS)(20%) 5(b) 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20%

6.Legalincentivestoprocurement

officersandemployees(20%) None 1.40% 0.00% 0.00% 3.20% 0.00% 0.00% 1.40% 0.00% 0.00% 3.20% .92%

TotalforAgencyProfessionalization 14.20% 12.80% 3.20% 6.40% 3.20% 3.20% 14.20% 3.20% 3.20% 6.40% 7.00%

PILLAR III – The Procurement Operations and Market Practices

OrganizationalStructure (�6%) 7.BACandBACSecretariat(40%) None 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40%

8.Hierarchicalstructureof

agency(30%) 6(d) 1.60% 4.80% 4.80% 4.80% 4.80% 4.80% 1.60% 4.80% 4.80% 4.80% 4.16%

9.Standarddocumentation

andprocedures(30%) 2(e),2(b), 4.80% 4.80% 4.80% 3.20% 4.80% 4.80% 4.80% 4.80% 2.40% 3.20% 4.24%

6(c)

TotalforOrganizationalStructure 12.80% 16.00% 16.00% 14.40% 16.00% 16.00% 12.80% 16.00% 13.60% 14.40% 14.80%

Agency Procurement On Competition (�0%)

Process (30%) 10.Methodofprocurement

used:Shopping(30%of10%) None 3.00% 0.00% 3.00% 0.00% 0.00% 3.00% 3.00% 0.00% 3.00% 3.00% 1.80%

11.LimitedSourceCompetition/ None 2.00% 0.00% 2.00% 0.00% 0.00% 2.00% 2.00% 0.00% 0.00% 2.00% 1.00%

Shopping(20%of10%)

12.Directcontracting(20%of10%) None 2.00% 0.00% 2.00% 0.00% 0.00% 2.00% 2.00% 0.00% 0.00% 2.00% 1.00%

13.Biddersparticipation(15%of10%) 7(b) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.50% 0.00% .15%

14.Timeforpreparationof

bids(15%of10%) None 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%

TotalforCompetition 8.50% 1.50% 8.50% 1.50% 1.50% 8.50% 8.50% 1.50% 6.00% 8.50% 5.45%

68

DOH

AFP

DND

NPC

CITY OF MARIKINA

DILG

DENR

BIR

AVERAGESTORES

BLI

MAJOR CRITERIA BIS INDICATOR NAME INDICATOR

�. Strategy (6%) 1.AgencyProcurement

ReformStrategy(40%) Indicator1 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40% 2.40%

2.Strategicpolicyinitiativesoutlined

bytheagency(30%) None 1.80% 0.00% 1.80% 0.00% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.44%

3.Key/Strategicprocurement

issues(30%) None 0.00% 0.00% 1.80% 0.00% 1.80% 1.80% 0.00% 1.80% 1.80% 1.80% 1.08%

TotalforStrategy 4.20% 2.40% 6.00% 2.40% 6.00% 6.00% 4.20% 6.00% 6.00% 6.00% 4.92%

PILLAR II – The Central Institutional Framework and Management Capacity

Agency 4.HumanCapital(60%) 5(c) 9.60% 9.60% 0.00% 0.00% 0.00% 0.00% 9.60% 0.00% 0.00% 0.00% 2.88%

Professionalization 5.UseoftheGovernment

Measures (�6%) ProcurementSystem(G-EPS)(20%) 5(b) 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20% 3.20%

6.Legalincentivestoprocurement

officersandemployees(20%) None 1.40% 0.00% 0.00% 3.20% 0.00% 0.00% 1.40% 0.00% 0.00% 3.20% .92%

TotalforAgencyProfessionalization 14.20% 12.80% 3.20% 6.40% 3.20% 3.20% 14.20% 3.20% 3.20% 6.40% 7.00%

PILLAR III – The Procurement Operations and Market Practices

OrganizationalStructure (�6%) 7.BACandBACSecretariat(40%) None 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40%

8.Hierarchicalstructureof

agency(30%) 6(d) 1.60% 4.80% 4.80% 4.80% 4.80% 4.80% 1.60% 4.80% 4.80% 4.80% 4.16%

9.Standarddocumentation

andprocedures(30%) 2(e),2(b), 4.80% 4.80% 4.80% 3.20% 4.80% 4.80% 4.80% 4.80% 2.40% 3.20% 4.24%

6(c)

TotalforOrganizationalStructure 12.80% 16.00% 16.00% 14.40% 16.00% 16.00% 12.80% 16.00% 13.60% 14.40% 14.80%

Agency Procurement On Competition (�0%)

Process (30%) 10.Methodofprocurement

used:Shopping(30%of10%) None 3.00% 0.00% 3.00% 0.00% 0.00% 3.00% 3.00% 0.00% 3.00% 3.00% 1.80%

11.LimitedSourceCompetition/ None 2.00% 0.00% 2.00% 0.00% 0.00% 2.00% 2.00% 0.00% 0.00% 2.00% 1.00%

Shopping(20%of10%)

12.Directcontracting(20%of10%) None 2.00% 0.00% 2.00% 0.00% 0.00% 2.00% 2.00% 0.00% 0.00% 2.00% 1.00%

13.Biddersparticipation(15%of10%) 7(b) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.50% 0.00% .15%

14.Timeforpreparationof

bids(15%of10%) None 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%

TotalforCompetition 8.50% 1.50% 8.50% 1.50% 1.50% 8.50% 8.50% 1.50% 6.00% 8.50% 5.45%

69

Proposed Action Plan for Philippine Public Procurement System

BIS INDICATOR NAME

BLI INDICATOR

DPWH

DEPED

Annex 3: Summary of APPI Assessment Scores for �0 Agencies (as of June 22, 2007)

MAJOR CRITERIA BIS INDICATOR NAME BLI INDICATOR

On Transparency (�0%)

15.Advertisementofbidnoticesand

publicationofawards(70%of10%) 1(c) 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%

16.Postingofallprocurement

opportunities,activities,awardsin

G-EPS(30%of10%) 5(a) 1.50% 0.00% 3.00% 0.00% 0.00% 3.00% 1.50% 0.00% 0.00% 3.00% 1.20%

TotalforTransparency 8.50% 7.00% 10.00% 7.00% 7.00% 10.00% 8.50% 7.00% 7.00% 10.00% 8.20%

On Efficiency (�0%)

17.ProcurementsinAP

(30%of10%) 3(a) 0.00% 3.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 3.00% 3.00% .9%

18.Timeforpublicbidding

(25%of10%) 6 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

19.Timeforbidevaluation

(15%of10%) None 1.50% 0.00% 0.00% 1.50% 2.50% 0.00% 1.50% 1.50% 1.50% 1.50% 1.15%

20.Biddingprocesscancelled None 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%

(15%of10%)

21.Latepayments(15%of10%) 3(b) 0.00% 0.00% 0.00% 1.50% 0.00% 0.00% 0.00% 1.00% 1.50% 1.50% .55%

TotalforEfficiency 5.50% 7.00% 4.00% 7.00% 6.50% 4.00% 5.50% 6.50% 10.00% 10.00% 6.60%

Total for Agency Procurement Process 22.50% �5.50% 22.50% �5.50% �5.00% 22.50% 22.50% �4.00% 23.00% 28.50% 20.25%

Effectiveness (�6%)

22.AwardpriceslowerthanABC None 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40%

23.Contractamountincrease(30%) None 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80%

24.NumberofProtests(10%) 1(h) 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60%

25.Timetoresolveprotests(10%)(10)b 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60%

26.Actiontakenonprotest(10%) 10(c) 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60%

Total for Effectiveness �6.00% �6.00% �6.00% �6.00% �6.00% �6.00% �6.00% �6.00% �6.00% �6.00% �6.00%

PILLAR IV – The Integrity of the Public Procurement System

Accountability 27.Internalauditunits(60%) 9(a) 9.60% 9.60% 9.60% 9.60% 0.00% 9.60% 9.60% 0.00% 0.00% 9.60% 6.72%

Measures (�6%) 28.Systemsandprocedurestohearand 10(b) 6.40% 6.40% 6.40% 6.40% 0.00% 6.40% 6.40% 0.00% 0.00% 6.40% 4.48%

documentadministrativecases(40%)

TotalforAccountabilityMeasures 16.00% 16.00% 16.00% 16.00% 0.00% 16.00% 16.00% 0.00% 0.00% 16.00% 11.20%

TOTALAGENCYRATING 85.70% 78.70% 79.70% 70.70% 56.20% 79.70% 85.70% 56.20% 61.80% 87.30% 74.17%

70

DOH

AFP

DND

NPC

City of Marikina

DILG

DENR

BIR

AverageStores

MAJOR CRITERIA BIS INDICATOR NAME BLI INDICATOR

On Transparency (�0%)

15.Advertisementofbidnoticesand

publicationofawards(70%of10%) 1(c) 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%

16.Postingofallprocurement

opportunities,activities,awardsin

G-EPS(30%of10%) 5(a) 1.50% 0.00% 3.00% 0.00% 0.00% 3.00% 1.50% 0.00% 0.00% 3.00% 1.20%

TotalforTransparency 8.50% 7.00% 10.00% 7.00% 7.00% 10.00% 8.50% 7.00% 7.00% 10.00% 8.20%

On Efficiency (�0%)

17.ProcurementsinAP

(30%of10%) 3(a) 0.00% 3.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 3.00% 3.00% .9%

18.Timeforpublicbidding

(25%of10%) 6 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

19.Timeforbidevaluation

(15%of10%) None 1.50% 0.00% 0.00% 1.50% 2.50% 0.00% 1.50% 1.50% 1.50% 1.50% 1.15%

20.Biddingprocesscancelled None 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%

(15%of10%)

21.Latepayments(15%of10%) 3(b) 0.00% 0.00% 0.00% 1.50% 0.00% 0.00% 0.00% 1.00% 1.50% 1.50% .55%

TotalforEfficiency 5.50% 7.00% 4.00% 7.00% 6.50% 4.00% 5.50% 6.50% 10.00% 10.00% 6.60%

Total for Agency Procurement Process 22.50% �5.50% 22.50% �5.50% �5.00% 22.50% 22.50% �4.00% 23.00% 28.50% 20.25%

Effectiveness (�6%)

22.AwardpriceslowerthanABC None 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40% 6.40%

23.Contractamountincrease(30%) None 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80% 4.80%

24.NumberofProtests(10%) 1(h) 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60%

25.Timetoresolveprotests(10%)(10)b 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60%

26.Actiontakenonprotest(10%) 10(c) 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60% 1.60%

Total for Effectiveness �6.00% �6.00% �6.00% �6.00% �6.00% �6.00% �6.00% �6.00% �6.00% �6.00% �6.00%

PILLAR IV – The Integrity of the Public Procurement System

Accountability 27.Internalauditunits(60%) 9(a) 9.60% 9.60% 9.60% 9.60% 0.00% 9.60% 9.60% 0.00% 0.00% 9.60% 6.72%

Measures (�6%) 28.Systemsandprocedurestohearand 10(b) 6.40% 6.40% 6.40% 6.40% 0.00% 6.40% 6.40% 0.00% 0.00% 6.40% 4.48%

documentadministrativecases(40%)

TotalforAccountabilityMeasures 16.00% 16.00% 16.00% 16.00% 0.00% 16.00% 16.00% 0.00% 0.00% 16.00% 11.20%

TOTALAGENCYRATING 85.70% 78.70% 79.70% 70.70% 56.20% 79.70% 85.70% 56.20% 61.80% 87.30% 74.17%

7�

Interestingly,outofthoseawareoftheGPRA,morerespondents

belonging to class E are optimistic about the anti-corruption

featuresof theGPRA,with97%whobelieve that the lawcan

lessencorruption.OmbudsmanMarcelo,therefore,recommends

that the communication strategy should not take for granted

Filipinos belonging to the class E. He believes that Filipinos

belongingtoclassEmaybetappedtobeobservers.Hecites,as

examples,thenon-governmentalorganizationsinlloilowhich,in

partnershipwiththeOmbudsman,havefiledcasesagainsttheir

localgovernmentofficialsforprocurementrelatedcases.

Further, more government employees are optimistic about the

impactofGPRA in lesseningcorruption.Fouroutoffive (83%)

of government employees, whether aware of the GPRA or

not, believe that the GPRA can help reduce corruption. More

importantly,almostall(96%)ofthegovernmentemployeeswho

areawareoftheGPRAbelievethatitcanhelpreducecorruption

ingovernment.

73% to 77% Agree with Reform Measures in the GPRAToensureanopen,competitive,andtransparentpublicprocurement

system,theGPRAprescribespublicbiddingasageneralmodeof

procurement.Further,theGPRAmandatesthatall invitationsto

bidmustbepublishedinanewspaperofgeneralcirculationandin

governmentWebsites.Namesofwinningbiddersandtheamount

of contracts awarded to them must likewise be posted in the

PhilippineGovernmentElectronicProcurementSystem(PhilGEPS).

Governmentagenciesarealsomandatedtoinviteobserversfrom

non-governmentorganizationsandprofessionalassociations.

ThesearesomeofthereformmeasuresincorporatedintheGPRA

inordertoenhancetransparencyandlessencorruptioninpublic

procurement.Surveyresultsindicatethataboutthree-fourths

(73-77%)ofFilipinosagreewiththesemeasures,withpluralities

(42-49%)ofthemwhosaytheyaredefinitely needed.

Annex 4: SWS Survey Results on the Effectiveness of the Public Procurement System

[Excerpt from February 2007 report, “Public Opinion on Procurement Reform”

�3% Aware of the Government Procurement Reform Act (GPRA)Based on survey results, only one in ten (13%) of Filipinos are

aware of the Republic Act No. 9184, or the Government

Procurement Reform Act. Most of the respondents who are

awareoftheGPRAbelongtoclassesABC(26%)andarecollege

graduates (30%). WHAT DOES ABC, D, E MEAN? WHERE ARE

COLLEGEGRADUATES?

Further, compared to other sectors of employment, more

respondentsemployedbythegovernmentareawareoftheGPRA

constituting29%;whilethoseemployedintheprivatesectoror

areself-employedcomprise18%and11%,respectively.However,

the29%awarenessratingforgovernmentemployeesisstilllow

considering that the GPRA is being implemented by the public

sectorandthatthetrainingprogramoftheGPPB-TSOisprimarily

aimedateducatinggovernmentemployees.

76% Optimistic that GPRA Can Reduce CorruptionNevertheless, 76% of total respondents believe that the GPRA

can help reduce corruption in government contracts. Further,

87%ofthe13%respondentswhoareawareoftheGPRAbelieve

that implementation of the law can help reduce corruption in

government.Allstakeholdersseethesefiguresasveryencouraging

signs.

AWARENESS OF GPRA, BY AREA, CLASS AND AGE

Q105. We have a law that provides for the standard rules in public bidding for government projects to guarantee that all contractors are given equal opportunity to join and win a government contract.This is called the Government Procurement Reform Act or RA 9184. Have you heard or read something about it?

13% Total Philippines

19% NCR10% Balance Luzon

17% Visayas

14% Mindanao

26% ABC

10% D

16% E

11% 18-24

11% 25-34

16% 35-44

16% 45-54

13% 55+

0% 5% 10% 15% 20% 25% 30%

0%

20%

40%

60%

80%

100%TOTAL RP

TotalInter-views

AwareofGPRA

Total Interviews Aware of GPRA

ABC D EClass

PRIV SELFEMPL.

GOV’T.Sector of Employment

% WHO SAY GPRA WILL HELP REDUCE CORRUPTIONIN GOV’T, BY CLASS AND SECTOR OF EMPLOYMENT

87

76

83

7674

8184

97

76 75

83 84 85

Total Interviews Aware of GPRA

November 24-29 2006, National Survey

November 24-29, 2006 National Survey

96

Gov’t. employees are more

sanguine about GPRA

Q106. Do you think this law will help reduce corruption in government contracts?

72

Whenfurtherdissectedaccordingtoarea,surveyresultsindicate

thatmorerespondentsfromNCRandBalanceLuzonfeelstrongly

about theneed to adopt these reformmeasures.On theother

hand, the least number of respondents who believe in these

reformmeasuresarefromMindanao.

Moreover,mostoftherespondentswhobelievethatthesereform

measures are definitely needed belong to classes ABC and are

college graduates. Also, it appears that older people (aged 55

andabove)feelmorestronglyabouttheneedtoimplementthese

measures.

3.4. Public Perception on Effectivity of GPRAToexaminethepublicperceptionontheeffectivityoftheGPRA

withrespecttoreducingcorruptioningovernmentcontracts,and

accountability and transparency, SWS asked the respondents’

opinion on a battery of trend questions. On the whole, trends

arepositivewithoneexception.Pluralitiesof thegeneralpublic

agreethatcomparedtoaboutfiveyearsago,whenGPRAwasnot

yet implemented, it isnoweasier tomakegovernmentofficials

accountable for irregularities in government contracts, to get

information about government biddings, contractors are now

more on time in completing government contracts, and public

officersarenowmorecarefulintheuseofgovernmentfunds.bU

moreofthosewhosaythatcorruptioningovernmentcontractsis

moreprevalentnowthanaboutfiveyearsago.

BATTERY OF TREND QUESTIONS:COMPARED TO ABOUT FIVE YEARS AGO...

-8

+2

+7

+8

+1642 28 26

33 25

34 26

35 33

29 37

35

35

29

30

AGREE UNDECIDED DISAGREE NET

It is now easier topunish gov’t officials

responsible forirregularities in gov’t

contracts

It is now easier for anyonewho wants to bid

on a gov’t contractto get info. about

the bidding

People who havecontracts with the gov’t

are now more ontime in completing

their contracted work

Public officers are nowcareful in the use ofpublic funds in gov’t

contracts

Corruption in gov’tcontracts is now

less common

0%

20%

40%

60%

80%

100%

Usepublicbidding

EVALUATION OF EFFECTIVENESS OF SPECIFIC WAYSTO REDUCE CORRUPTION IN GOV’T CONTRACTS

Publish in newspapersopportunitiesto bid thegov’t contracts

Havebiddingsobservedby NGOS

Buy fromlowestbiddergiven thequalityit needs

Put on itsWebsitesthe winningbidders &how much they bid

Put on itsWebsitesopportunitiesto bid ingov’tcontracts

It is too much trouble

It might justhelp

Somewhatimportant

Definitelyneeded

5 4 5 5 6 5

15 16 18

28 28 28 30

49 48 46 45

2930

42

201817

43

0%

20%

40%

60%

80% BAL LUZ VIS MIN

Usepublicbidding

% WHO SAY SPECIFIC WAYS TO REDUCE CORRUPTIONIN GOV’T CONTRACTS ARE DEFINITELY NEEDED, BY AREA

NCR

Publish in newspapersopportunitiesto bid in gov’tcontracts

Havebiddingsobservedby NGOs

Buy fromlowestbiddergiven thequality itneeds

Put on itswebsites thewinningbidders& how muchthey bid

Put inwebsitesopportunitiesto bid in anygov’t contracts

47

38

53 5248

37

54

48

36

4846

4339

4239 41

34

4946

49

5557

4946

November 24-29, 2006 National Survey

November 24-29, 2006 National Survey

November 24-29, 2006 National Survey

The gov’t should always...

% It is DEFINITELY NEEDED that the gov’t should always...to reduce corruption in gov’t contracts

Trends are positive, with one exception

73

Annex 5: Recommendations and Agreements on CSO Participation

ISSUES

�. Sustaining participation

2. Absence of clear procedures in the

selection of observers (especially in

the LGUs)

3. Absence of a guide in observing

public biddings

4. Trained observers not being invited

5. Observers in the LGUs are not

trained on the law

RECOMMENDATIONS

Financialsupport.

EnsurethecommitmentoftrainedCSOs

toparticipateinactualmonitoring,by

establishingoperatingnetworksoutside

MetroManila.

Qualitymonitoringoftrainingsandtrained

observers,andthepossibilityofcoming

upwitharegistrationsystemtoensure

thatonlyappropriatelytrainedobservers

areinvited.

Considerthepossibilityofenteringinto

anagreementbetweenchurch-based

organizationsactingasobserversinLGUs.

Explorethepossibilityoftappingthe

servicesofgraduatingstudentsandthe

othersinacademe.

Reiteratetheprovisionofthelaw

regardingtheselectionofobservers,and

improvetheexistingguidelinesinorderto

increasetheparticipationofappropriate

observers.

Developaguideontheconductofthird

partyobservation,definingtherole

ofobserversinrelationtopromoting

transparencyandaccountability.

Issuestandardcheckliststhatare

user-friendlytoobservers,butprovide

substantialinformationformonitoringand

policyagencies.

See#2above.

Developtrainingprogramsforobservers

outsideMetroManila.

InformingtheLGUsoftheneedtotrain

theirobservers.

AnLGUsshouldbemotivatedtointoa

MOAwithaCSOthathasadeepnetwork

nationwide.See#3above.

COMMENTS/AGREEMENTS

Financialsupportshouldcomeoutside

ofthegovernment.Theorganization

shouldtakecareoftheexpensesofthe

deploymentoftheirownmembersin

observingpublicbidding.

ThegovernmentshouldinformtheCSOs

ofalternativesourcesoffunding.

Onepercentofearningsfromsaleofbid

documentsshouldbespentontraining

CSOs,ratherthanasfinancialincentives.

Observersshouldbearmedwithuser-

friendlychecklistsduringbiddings,sothat

lesseffortisspentinhavingtodevelop

DiagnosticReports.Thiswillalsoprovide

asingleformatthatreadilyprovides

thenecessarydatatorelevantoversight

agencies.

Networkswouldhavetobeestablished

toprocessthedatafromtheobservers’

checkliststogenerateinformation.

Theretireescanalsobetapped.

ApledgeofcommitmentfromCSOsand

theGOPisneeded.

Reportsshouldnotonlycoverthe

procedures,butalsotheactualconditions/

problems,e.g.,fundingproblems,

attendanceofBACsmembers.

Astandardchecklistandanarrative

observation.

Observersshouldnotbeconsideredas

votingmembers,becausethemomentthey

becomevotingmembers,theyimmediately

gainaninterestinthebiddingandlose

theirthirdpartyobjectivity.

See#2above.

74

Annex 5: Recommendations and Agreements on CSO Participation

ISSUES

6. Quality of training

7. Absence of mechanism for

maximizing observers’ report

8. Improving feedback handling

mechanism

RECOMMENDATIONS

Agovernmentagencyshouldbeincharge

ofaccreditingCSOtrainingprograms,

withemphasisnotonlyoncompliance

withprocurementrulesandprocedures,

butmoreonidentifyingRED FLAGS

andprevalentmodesofcircumventing

controls.

Institutionalizeamechanismforgathering,

summarizingandestablishingtrends

basedonexistingreports.

PublicationofsuccessstoriesofCSOs.

CreationofnetworksoftrainedCSO

observersarmedwitheasy-to-use

checklistsandstandardreportingformats

GPPBandotheroversightagencies

toenterintoanagreementto

institutionalizingfeedbackhandling

mechanisms.Thismaybeconductedafter

consultationwithCSOs.

Utilizationofthechecklistsandstandard

reportingformatsforinformation

generationbyacentralizedagency,such

astheGPPBandtheOmbudsman.

COMMENTS/AGREEMENTS

Centralmanagementisneededinorder

tosetthefocus,andmanagethewhole

program.Provideforanavenueto

consolidatefindings.Trainingsusingthe

vernacularinthecaseofthebarangays.

Customizedtrainingsforbarangays.

Thereportwillbeself-servingifonlythe

BACandthelocalchiefexecutivewouldbe

furnishedwithcopiesofthese.

Analliance/coalitionofCSOsshouldbea

forcetoreckonwith,astheysynthesizethe

reports,andrateagenciesbasedonthese.

EmpoweringtheCSOsthrutheuseoftheir

reports.

Thealliance/coalitionofNGOsshouldbe

nationwidesothatanoversightagencycan

easilytouchbasewithanobserverinthe

region.

See#7above.

75

ANNEX 6: UNACCEPTABLE GOP PROCUREMENT RULES

ISSUES

1.Arethereeligibilityrestrictions

basedonnationalityofbidder

and/ ororiginofgoods(otherthan

primaryboycotts)?

2.Arethereprimaryboycottswhich

areestablishedbylaw?

3.Arebiddingopportunities

advertisedinthelocalpress?

4.Areprospectivebiddersallowed

atleast30daysforbidpreparation

(exceptforcommodities/small

goodscontracts)?

5.Arecontractors/suppliers

prequalifiedforlarge/specialized

contracts?

6.Areminimumexperience,technical

andfinancialrequirements(for

pre-orpost-qualification)explicitly

statedinthedocuments?

Registrationshouldnotbeused

asasubstituteforadvertisement

whenopencompetitionisrequired.

However,whenadvertisingfor

civilworks,borrowerscould

indicatetherequiredminimum

categoryofcontractorspecifiedin

theregistrationsystem.

7.Isaninvitationtoprequalify

advertisedforeachprocurement

involvinglargeorcomplexpotential

contracts?

A. CHECKLIST COMPARING NCB PROCEDURES AND WB AND ADB POLICIES

YES

/

/

/

/

/

NO

/

/

WB AND ADB POLICY

Notallowed

Onlyprimaryboycottsare

acceptable

ADB:Noboycottsareallowed

WB:Requiredforallpublic

bidding.

ADB:Requiresadvertising

above$500,000forgoodsand

$1millionforworks.

Required

Required

Required

Required

Required

REMARKS

Therearepreferencesonnationality

ofbiddersinthelaw.Tobe

retainedintheNCBAnnexasan

unacceptablerule

Thelawhasnopolicyonboycott.

Acceptable

Thelawmandatesadvertisementof

allpublicbiddingsandpostingin

PhilGEPSforallprocurement.

Acceptable

LatestGPPBdirectiveshortened

thebidpreparationtimeless

than30daysforpublicbidding.

Unacceptable.

Thelawmandatesforeligibility

screening(ES)process,buttheES

requireslonglistofdocuments

thatcoulddisqualifiybiddersfor

non-submissionofoneunnecessary

document.

Unacceptable

Yes,theminimumrequirements

areexplicitlystatedinthebidding

documents.Acceptable

Thereisaregistrationofcontractors

thatcapturesbasicqualification

data.

Acceptable

Advertisementforpublicbidding

isrequired.

Acceptable

76

Annex 6: Unacceptable GOP Procurement Rules

NO

/

/

/

WB AND ADB POLICY

Notallowed

Required.

Notallowed

Acceptableonlyifthey(i)are

financiallyautonomous,(ii)

operateundercommerciallaw,

and(iii)areindependentfrom

borroweranditspurchasing/

contractingauthority.

Shouldbediscouraged.

Acceptableonlyifregistration

criteria,processandcost

reasonable/efficientandqualified

foreignfirmsarenotprecluded

fromcompeting.

Acceptableonlyifjustifiedby

exceptionalcircumstances

Notallowed,exceptwhenbidders

havetosubmitphysicalsamples.

Thentheycanberequiredto

deliverbidsbymail,bycourier,by

hand,etc.

Notallowed.

Notallowed,exceptforunskilled

labor,ifavailablelocally.

REMARKS

Foreignfirmsareencourage,

butnotrequiredtojointventure

withlocalfirms.Acceptable.

Yes.Acceptable

Thelawdoesnotsetlimitation.

Acceptable

Parastatalsfollowcommerciallaw,

areautonomousandindependent

asprovidedintheirCharter.

Acceptable

Thereisaseparatelawonlicensing

andregistrationforcontractors

anditrequireslicensingpriorto

submissionofbids.Unacceptable.

ToberetainedintheNCBAnnex

Yes,theyareallowedtoextend

onlyforvalidreasons.

Acceptable.

Therearenorestrictionsonthe

meansofdeliveryofbids,hence

acceptable.

Flaglawandprovincialpreferences

areprovidedinthelaw.

Unacceptableandtoberetainedin

theNCBAnnex.

Therearenorestrictionson

sourcesoflaborandmaterialsin

thelaw.Acceptable.Theprovision

inthecurrentNCBAnnexshould

bedeleted.

ISSUES

8.Arejointventureswithlocalfirms

requiredforforeignfirms’

eligibility?

9.Arejointventurepartnersjointly

andseverallyliable?

10.Aretheresetlimitationstothe

numberoffirmswhocanbidfo

acontract?

11.Areparastatalsallowedtobid?

12.Arebiddersrequiredtoregister

withalocalorfederalauthorityas

apriorconditionforbidding?

13.Areextensionstobidvalidity

allowed?

14.Arethererestrictionsonthe

meansofdeliveryofbids?

15.Ispreferencegiventosuppliers

orcontractorsbasedonregion

orlocalityofregistration,small

size,ethnicownership,etc.?

16.Arethererestrictionsonsourcesof

laborandmaterial?

YES

/

/

/

/

/

/

A. CHECKLIST COMPARING NCB PROCEDURES AND WB AND ADB POLICIES

77

Annex 6: Unacceptable GOP Procurement Rules

YES

/

/

/

/

NO

/

/

WB AND ADB POLICY

Required

Shouldbediscouraged.Allowed

onlyif(i)domesticlawprecludes

useofoneenvelopeand(ii)

providedadequatesafeguards

againstretainingsecondenvelope

unopenedareincorporatedin

thetwoenvelopeproceduresand

effectivebidprotestmechanisms

arealreadyinplaceforthedue

processingofbidcomplaints.

Acceptable,providedall

responsivebiddersareallowedto

bid,theprocessisefficientandno

seriousdelaysresult.

Notallowed.

Onlyifquantifiedinmonetary

terms

Required

Notallowed,exceptwherethebidpriceissubstantiallyabovemarketorbudgetlevelsandthenonlyifnegotiationsarecarriedouttotrytoreachasatisfactorycontractthroughreductioninscopeand/orreallocationofriskandresponsibilitywhichcanbereflectedinareductioninContractPrice.(SeeGuidelinespara2.60)

REMARKS

Yes,openpublicbiddingisthe

primarymodeofprocurement.

Acceptable

Whilethelawrequirestwoor

threeenvelopes,theenvelopesare

requiredtobeopenedonthesame

dayonthesamebidopeningevent.

Transparencyisachieved.This

practiceisacceptable.

Thelawallowsawardtoonlyone

bidprovideditisresponsive.Thisis

acceptable.

ABCisusedasceiling.Itisallowed

byWBundercertainconditionsas

indicatedinAnnex8.3.Therefore

acceptableprovidedtheconditions

aremet.ADBdoesnotallowit.

Yes,theyareallowedprovided

quantifiable.Acceptable.

Thelawmandatesthatawardbe

madetothelowestcalculatedand

responsivebid.Acceptable.

Thelawprohibitsnegotiationwithlowestcalculatedandresponsivebidder.Acceptable.

17.Ispublicbidopeningrequired?

Doesitoccurimmediatelyor

closelyfollowingthebidsubmission

deadline?

18.Isa“twoenvelope”bid

openingprocedurepermittedfor

procurementofgoodsorworks?9

NOTE:ADBallowstwoenvelope

bidding.

19.Isautomaticrebiddingrequiredif

toofewbidsarereceived?

20.Is“bracketing”usedinbid

evaluations?10

Arebidevaluationcriteriaotherthan

priceallowed?

21.Isawardmadetolowestevaluated

qualifiedandresponsivebidder?

22.Arepricenegotiationsconducted with“winning”bidderspriorto

contractsignature?

ISSUES

A. CHECKLIST COMPARING NCB PROCEDURES AND WB AND ADB POLICIES

78

9 All technical envelopes are opened first and, after review, price envelopes of all or only qualified/responsive bids are opened in the second round.�0 Rejection of bids outside a range or “bracket” of bid values.

Annex 6: Unacceptable GOP Procurement Rules

YES

/

/

NO

/

WB AND ADB POLICY

Notrequired,butrecommended

forworkscontractsofoneyearor

moreindurationwhendomestic

inflationrateishigh.

Required(tobeacceptablethey

shouldbebalanced,reasonable,

andclearlyaddressthemost

importantissuesthatleadto

problemsduringperformance,

e.g.riskallocation,payment,

inspection,completion/

acceptance,insurance,

warrantees,changes,contract

remedies,forcemajeure,

governinglaw,termination,etc.)

Acceptable,buttheBank’s

approvalisrequiredforchanges

inthosecontractsthatwere

subjecttopriorreviewunderthe

LoanAgreement.

REMARKS

Priceadjustmentisallowed

forextraordinaryinflation,

fortuitouseventorextraordinary

circumstancesperGPPBRes.

07-2004datedJuly22,2004.

Acceptable

Thesizeandnatureofthecontract

arethebasesforthetermsand

conditionsspecifiedinthebidding

documents.Acceptable.

Acceptable.RetaintheruleinNCB

Annexthatforcontractssubject

topriorreview,15%ormore

modificationshouldbesubjectto

priorreview.

23.Arepriceadjustmentprovisions

generallyused?

24.Arethetermsandconditionsused

ingoodsandworksprocurement

generallyappropriateforthesizeand

natureofcontractintended?

25.Arecontractscope/conditions

modifiedduringimplementation?

ISSUES

A. CHECKLIST COMPARING NCB PROCEDURES AND WB AND ADB POLICIES

79

Annex 7: Review of WB’s NCB Procurement Annex

CURRENT VERSION

1.Eligibilityscreeningshallnot

beapplied.However,bidsthat

donotcontainanyofthefollowing

documentswillnotpassthe

documentarycompliancecheck:

(a)evidenceoftherequired

financial,technicalorproduction

capability;(b)auditedfinancial

statements;(c)creditlineorcash

depositcertificate;(d)bidsecurity;

and(e)authorityofthebid

signatory

2.Incaseofprequalification,ifany

bidderisdeniedaccessto

thebiddingprocessforreasons

unrelatedtoitsfinancialand

technicalqualificationstoperform

thecontract,priorconcurrenceof

theBankshallbesought.

3.Aceilingmaybeapplied

tobidprices,withprior

concurrenceoftheBankinadvance

ofbidding.However,theApproved

BudgetEstimatemaybedisclosed

intheadvertisementorinthe

biddingdocuments.

4.Domesticorregionalpreferences

willnotbeappliedintheevaluation

ofbids,andotherpreferencein

effectinthePhilippineswillnotbe

usedexceptwithpriorconcurrence

oftheWB.

5.Suppliersandcontractorswillnot

berequiredtopurchaseonlylocal

goodsorsuppliesormaterials.

RESULT OF REVIEW USING CHECKLIST

Eligibilityscreeningisnotacceptable.

Retainthesamewording.

Thereisnoprequalificationprocessunder

theProcurementLaw.EligibilityScreening

processperSection23ofthelawis

similartoaprequalificationprocesswhere

thedocumentarysubmissionsrelevant

tothequalificationofthebiddersare

screenedusingpassorfailcriteria.Since

prequalificationisnon-existentinthelaw,

thissuperfluous.

Followingharmonizationprocess,ceiling

isnowallowedprovidedfourconditions

aremet,whichshouldbeindicatedinthe

Annex.

Provincialpreferencesandgeneral

preferencesarestillineffect.Retainthisin

theNCBAnnex.

Thereisnorequirementinthelawor

theIRRtopurchaseonlylocalgoodsor

suppliesormaterials.Hencethisshouldbe

Acceptable.Theprovisioninthecurrent

NCBAnnexshouldbedeleted.

PROPOSED CHANGES

Nochange.

Fordeletion.

Aceilingmaybeappliedtobidpricesprovidedthefollowingconditionsaremet:(a)Biddingdocumentsareobtainablefreeofchargeonafreelyaccessiblewebsite.(b)TheagencyhasproceduresinplacetoensurethattheABCisbasedonEngineer’sEstimate;(c)Theagencyhastrainedcostestimatorsonestimatingpricesandanalyzingbidvariance;(d)theagencyhasestablishedasystemtomonitorandreportbidpricesrelativetoABCandEngineer’sestimate.

Nochange.

Fordeletion.

80

CURRENT VERSION

6.Incaseofcontractsforprior review,modificationexceeding 15%ofcontractamountand materialschangesintheconditions duringimplementationrequireprior Bankconcurrence.

7.Foreignsuppliersandcontractors shallbeallowedtoparticipate,if interested,withoutfirstbeing requiredtoassociatewith,or enterintojointventure,withlocal firms.Moreover,foreignbidders shallbeallowedtobid,even withoutregistration,licensing,and othergovernmentauthorizations, leavingtheserequirementsfor afterawardandbeforesigningof contract

8.Forworkscontract,theexperience qualificationrequirementshallbe: (a)atleastonepreviouscontract at80%oftheestimatedcostof thecontractbeingprocured;and (b)anannualturnoverfromall worksaveragedoverthelastthree yearsequalto100%ofthe estimatedcostofthecontract beingprocured.

RESULT OF REVIEW USING CHECKLIST

Acceptable.RetaintheruleinNCBAnnex

thatforcontractssubjecttopriorreview,

15%ormoremodificationshouldbe

subjecttopriorreview.

Unacceptable.

Basedonexperience,thisrequirementis

usefultoensurecontractorcapability.

PROPOSED CHANGES

Nochange.

Nochange.

Nochange.

Annex 7: Review of WB’s NCB Procurement Annex

8�

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.

Annex 8A: World Bank’s NCB Requirements

82

1.General Theprocedurestobefollowedfornationalcompetitive

biddingshallbethosesetforthinRepublicAct9184of

theRepublicofthePhilippines,effective26January2003,

andImplementingRulesandRegulations,effective

8October2003,withtheclarificationsandmodifications

describedinthefollowingparagraphsrequiredfor

compliancewiththeprovisionsoftheProcurement

Guidelines.

2.Eligibility (a)Eligibilityscreeningshallnotbeapplied.However,bids

thatdonotcontainthefollowingdocumentswillnot

passthedocumentarycompliancecheckifaspecific

requirementofthebiddingdocuments:(i)evidenceof

therequiredfinancial,technicalorproductioncapability;

(ii)auditedfinancialstatements;(iii)creditlineor

cashdepositcertificate;(iv)bidsecurity;and(v)authority

ofthebidsignatory.

(b)Nationalsanctionlistsmaybeappliedonlywithprior

approvalofADB

3.Advertising BiddingofNCBcontractsestimatedat$500,000ormore

forgoodsandrelatedservicesor$1,000,000ormorefor

civilworksshallbeadvertisedconcurrentlywiththegeneral

procurementnoticesonADB’swebsite.

4.Price Ceiling Theapprovedbudgetforthecontract(ABC)maybe

published,butitshallnotbestatedorimpliedthatbid

pricesshallnotexceedtheABC,orthatbidevaluationwill

inanywaytakeintoaccounttheABC.TheABC,budgetary

allocation,ceilingprice,orsimilarestimatesofcontract

valueshallnotbeusedtorejectbidswithoutprior

concurrenceofADB.

5.Preferences (a)Nopreferenceofanykindshallbegiventodomestic

biddersorfordomesticallymanufacturedgoods.

(b)Suppliersandcontractorsshallnotberequired

topurchaselocalgoodsorsuppliesormaterials.

(c)ForeignsuppliersandcontractorsfromADBmember

countriesshallbeallowedtoparticipate,ifinterested,

withoutfirstbeingrequiredtoassociatewith,orenter

intojointventurewith,localfirms.

(d)ForeignsuppliersandcontractorsfromADBmember

countriesshallbeallowedtobid,withoutregistration,

licensing,andothergovernmentauthorizations,leaving

compliancewiththeserequirementsuntilafteraward

andbeforesigningofacontract.

6.Experience Qualification Foraworkscontract,theexperiencequalification

requirementshallbe:(i)atleastonepreviouscontractat

80%oftheestimatedcostofthecontractbeingprocured;

and(ii)anannualturnoverfromallworksaveragedoverthe

lastthreeyearsequalto100%oftheestimatedcostofthe

contractbeingprocured.

7.Bid Security Whererequired,bidsecurityshallbeintheformofabank

guaranteefromareputablebank.

8.Contract Amendment ADB’sconcurrenceshallbeobtainedbeforeapproving

modificationstocontractsunderimplementationwhere

(i)thevalueofthemodificationexceeds15%ofcontract

amount,or(ii)itresultsinmaterialchangestothe

conditionsofcontract.

9.Member Country Restrictions BiddersmustbenationalsofmembercountriesofADB,

and offeredgoodsmustbeproducedinmembercountries ofADB.

Annex 8B: ADB’s NCB Annex to Procurement Plan

83

INDICATOR

Existence of institutional development

capacity.

Efficient procurement operation and

practice

Annex 9: Status of Actions Agreed in 2005 CPAR Update (as of November 2007)

SPECIFIC WEAKNESS

1.Contractawardinformationnotavailableandaccessibleintheexistingsystem

2.Sustainablestrategyisnotyetdevelopedtoprovidetrainingadviceandassistancetodevelopthe

capacityofgovernmentandprivatesectorparticipantstounderstandtherulesandregulations

andhowtheyshouldbeimplemented.

3.Lackofsystemsandproceduresforcollectionandmonitoringofnationalprocurementstatistics

4.Lackofqualitycontrolstandardstoevaluateperformanceofstaffandaddresscapacity

developmentissues

5.Atthecontractingentitylevel,thelevelofprocurementcompetenceamonggovernment

officialswithintheentityisnotyetconsistentwiththeirprocurementresponsibilities

6.Atthecontractingentitylevel,theprocurementtrainingandinformationprogramsimplemented

forgovernmentofficials,aswellasforprivatesectorparticipantsisnotyetconsistentwith

demand.

7.Whileadministrativesystemsexistatthecontractingentitylevel,theydonotadequatelysupport

monitoringprocurementperformanceinmostagencies.

CURRENT ACTIVITIES/ACTIONS TO BE UNDERTAKEN

BeingdoneandmonitoredbyGPPBTSO-GPPBissuedletterstonon-complyingentities

remindingallheadsofprocuremententitiesandBACstopostinPhilGEPSawardsof

contract.

a)Ongoing,implementationofnationaltrainingthetrainersprogramforagenciesand

LGUs.

b)Ongoingasmedium-termapproachtocapacitybuildingistoaccreditStateUniversities

andColleges,includingtheNationalDefenseCollege;

c)Ongoing,asthedevelopmentoflong-termplantoprofessionalizeprocurementasa

careerforpractitioners.

d)To be done -privatesectortrainingtobeincludedinthetrainingand

professionalizationprogram.

To be done-

a)Developactualperformanceindicatorsandimplementasystemfordatacollectionand

informationanalysisfromcontractingentitiesuptoGPPB;

b)ReplicateappropriateBIStoassessnationalagenciesandLGUs,asmanagementtool.

To be done-Includesettingupofqualitycontrolstandardstoevaluatestaffperformance

andaddresscapacitydevelopmentissuesintheprofessionalizationprogrammentionedin

No.2(c).

a)LinktoNo.2.

b)To be done–conductoftrainingprogramtoimproveofskillsinestimatingpricesand

analyzingbidvariances.

c) To be doneasfollow-uptoValueEngineering(VE)Briefingsare:(i)toenhancecapacity

forvalueengineeringfocusingmoreonupstreamreviews;(ii)issuanceofguidelinesto

agenciesfortheuseofVE.

a)Ongoing,shouldbelinkedtoNo.2.Expansionofthetrainingshouldbedonetomeet

demand.

b)To be done-Thetrainingprogramshouldincludetheprivatesectorandthecivil

societyobservers.

a)LinktoNo.3.

b)OngoingdevelopmentofG-EPSwillprovideonlineinformationoncommonlyused

suppliesprocurementsuchasprices,contractsperformance.

c)To be done-Collectionoftechnicalspecificationsonnon-commonlyusedsupplies

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.

RESPONSIBLE AGENCIES, FUNDING AND TIMETABLE

GPPB–TSO;PhilGEPSwithfunding

assistancefromADB-WB

GPPB,SUCs,PCAcarriedinthisCPAR.

GPPB,carriedinthisCPAR

GPPB-TSO,carriedinthisCPAR.

GPPB,carriedinthisCPAR

GPPB,carriedinthisCPAR

GPPB,ProcurementService–PhilGEPS

Office–ongoingimplementation.The

agreedactioniscarriedinthisCPAR,

withfundingassistanceADBandWB.

84

INDICATOR

Existence of institutional development

capacity.

Efficient procurement operation and

practice

Annex 9: Status of Actions Agreed in 2005 CPAR Update (as of November 2007)

SPECIFIC WEAKNESS

1.Contractawardinformationnotavailableandaccessibleintheexistingsystem

2.Sustainablestrategyisnotyetdevelopedtoprovidetrainingadviceandassistancetodevelopthe

capacityofgovernmentandprivatesectorparticipantstounderstandtherulesandregulations

andhowtheyshouldbeimplemented.

3.Lackofsystemsandproceduresforcollectionandmonitoringofnationalprocurementstatistics

4.Lackofqualitycontrolstandardstoevaluateperformanceofstaffandaddresscapacity

developmentissues

5.Atthecontractingentitylevel,thelevelofprocurementcompetenceamonggovernment

officialswithintheentityisnotyetconsistentwiththeirprocurementresponsibilities

6.Atthecontractingentitylevel,theprocurementtrainingandinformationprogramsimplemented

forgovernmentofficials,aswellasforprivatesectorparticipantsisnotyetconsistentwith

demand.

7.Whileadministrativesystemsexistatthecontractingentitylevel,theydonotadequatelysupport

monitoringprocurementperformanceinmostagencies.

CURRENT ACTIVITIES/ACTIONS TO BE UNDERTAKEN

BeingdoneandmonitoredbyGPPBTSO-GPPBissuedletterstonon-complyingentities

remindingallheadsofprocuremententitiesandBACstopostinPhilGEPSawardsof

contract.

a)Ongoing,implementationofnationaltrainingthetrainersprogramforagenciesand

LGUs.

b)Ongoingasmedium-termapproachtocapacitybuildingistoaccreditStateUniversities

andColleges,includingtheNationalDefenseCollege;

c)Ongoing,asthedevelopmentoflong-termplantoprofessionalizeprocurementasa

careerforpractitioners.

d)To be done -privatesectortrainingtobeincludedinthetrainingand

professionalizationprogram.

To be done-

a)Developactualperformanceindicatorsandimplementasystemfordatacollectionand

informationanalysisfromcontractingentitiesuptoGPPB;

b)ReplicateappropriateBIStoassessnationalagenciesandLGUs,asmanagementtool.

To be done-Includesettingupofqualitycontrolstandardstoevaluatestaffperformance

andaddresscapacitydevelopmentissuesintheprofessionalizationprogrammentionedin

No.2(c).

a)LinktoNo.2.

b)To be done–conductoftrainingprogramtoimproveofskillsinestimatingpricesand

analyzingbidvariances.

c) To be doneasfollow-uptoValueEngineering(VE)Briefingsare:(i)toenhancecapacity

forvalueengineeringfocusingmoreonupstreamreviews;(ii)issuanceofguidelinesto

agenciesfortheuseofVE.

a)Ongoing,shouldbelinkedtoNo.2.Expansionofthetrainingshouldbedonetomeet

demand.

b)To be done-Thetrainingprogramshouldincludetheprivatesectorandthecivil

societyobservers.

a)LinktoNo.3.

b)OngoingdevelopmentofG-EPSwillprovideonlineinformationoncommonlyused

suppliesprocurementsuchasprices,contractsperformance.

c)To be done-Collectionoftechnicalspecificationsonnon-commonlyusedsupplies

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.

RESPONSIBLE AGENCIES, FUNDING AND TIMETABLE

GPPB–TSO;PhilGEPSwithfunding

assistancefromADB-WB

GPPB,SUCs,PCAcarriedinthisCPAR.

GPPB,carriedinthisCPAR

GPPB-TSO,carriedinthisCPAR.

GPPB,carriedinthisCPAR

GPPB,carriedinthisCPAR

GPPB,ProcurementService–PhilGEPS

Office–ongoingimplementation.The

agreedactioniscarriedinthisCPAR,

withfundingassistanceADBandWB.

85

INDICATOR

Functionality of the Public Procurement

Market

Effective control and Audit System

Degree of Access to Information

Annex 9: Status of Actions Agreed in 2005 CPAR Update (as of November 2007)

SPECIFIC WEAKNESS

8..Inadequateinternalcontrolmechanismsforundertakingprocurementoperationsatthe

contractinglevel.

9.Theparticipationrateofbiddersinresponsetocompetitivetenderinvitationsisnotconsistent

withthecapacityofthemarketplace.Lessuseofcomplaintandprotestmechanisms.

10.Lackofenforcementandfollow-uponfindingsandrecommendationsfromthe

controlframework.

11.Theinternalcontrolsystemdoesnotprovidetimelyinformationoncompliancetoenable

managementaction.

12.WhilethelawrequirespublicationintheG-EPS,websitesandnewspapers,thefullaccessto

informationbythecivilsocietyisnotyetfullyinstitutionalized.

13.Systemdoesnotexistyettocollectkeydatarelatedtoperformanceoftheprocurementsystem

andtoreportregularly.

14.SomeagenciesandLGUsarenotmaintainingrecordstovalidatedata.

CURRENT ACTIVITIES/ACTIONS TO BE UNDERTAKEN

a)Done -implementationofProcurementManualinallagenciesandharmonizationwith

donors.

b)To be done–(i)strengthentheinternalcontrolmechanismatagencylevelby:

enforcingthelawthatmandatescreationofinternalauditunits;(ii)prepareinternal

auditmanualonprocurement;and(iii)implementationofatrainingprogramfor

internalauditors.

a)To be done-intensiveinformationdisseminationandfamiliarizationonthenew

lawtotheprivatesectorandcivilsocietytobringtrustandconfidenceinthenewsystem.

b)To be done-supporttoprivatesectorinitiativesontrainingsonthenewsystem.

c) To be done-includeprivatelearninginstitutionsinaccreditationofprocurement

traininginstitutestocatertoprivatedemand.

d)To be done-issuanceofapolicythatadvertisementsshouldincludekeyevaluation

criteria.

a)Ongoing.ImplementtheGuidelinesforSuspensionandBlacklistingofBidders,

SuppliersandConstructors.DonorswillreviewforpossibleadoptioninFAPs.

b)To be done-StrengthentheroleofPresidentialAnti-GraftCommissioninensuringthat

procurementauditisinstitutionalizedthroughtheinternalauditunitsofeachagency.

Trainingonfraudexaminationandaudit.

c)To be done–(i)COAshouldincludeaspartofitsAnnualReportanassessment

ofadequacyofinternalcontrolmechanisminweakagencies;and,(ii)trainingof

investigatorsonfraudexaminationandaudit.

d)To be done–ProvideactiveassistancetoOmbudsmanforsuccessfulprosecutionof

procurementcases.

To be done–Agenciesshouldinstituteadequateinternalcontrolmechanismtoensurethat

timelyinformationareprovidedtoagencymanagement.LinktoNo.10.

a)Ongoing.SupporttoPWIinimprovingtrainingdesignanddeliveryforBACcivilsociety

observers(CSOs).

b)To be done-InformationsupportsystemfortrainedBACCSOs.

c)To be done-AdministrativesupporttothenewcoalitionofBAC-CSOs.

LinktoNo.3.

To be done-Issuanceofguidelinesforproperrecordmanagementfornationalagencies

andLGUs.PreparetheTORandhireconsultant.

RESPONSIBLE AGENCIES, FUNDING AND TIMETABLE

a)ProcurementManualissuedin

January2007;Pilottestingin6

agenciesdone.

b)IDFGrantonStrengtheningInternal

Auditon-going;IAmanualbeing

drafted).

CommunicationPlantobedeveloped

andimplementedbyGPPB,asagreed

inthisCPAR.

a)&b)Done.Guidelinesbeing

implemented.Listofblacklisted

suppliersandcontractorspublished

intheGPPBwebsite

(www.gppb.gov.ph).

c)COAwilldevelopandimplement

ProcurementAuditGuide.

d)trainingofOmbudsmanstaff

carriedinthisCPAR.

DBM,underAusAIDfunding,is

developinginternalcontrolsystem.

TheseactionsarecarriedinthisCPAR

aspartofCommunicationStrategy.

CarriedinthisCPAR.

CarriedinthisCPAR

86

INDICATOR

Functionality of the Public Procurement

Market

Effective control and Audit System

Degree of Access to Information

Annex 9: Status of Actions Agreed in 2005 CPAR Update (as of November 2007)

SPECIFIC WEAKNESS

8..Inadequateinternalcontrolmechanismsforundertakingprocurementoperationsatthe

contractinglevel.

9.Theparticipationrateofbiddersinresponsetocompetitivetenderinvitationsisnotconsistent

withthecapacityofthemarketplace.Lessuseofcomplaintandprotestmechanisms.

10.Lackofenforcementandfollow-uponfindingsandrecommendationsfromthe

controlframework.

11.Theinternalcontrolsystemdoesnotprovidetimelyinformationoncompliancetoenable

managementaction.

12.WhilethelawrequirespublicationintheG-EPS,websitesandnewspapers,thefullaccessto

informationbythecivilsocietyisnotyetfullyinstitutionalized.

13.Systemdoesnotexistyettocollectkeydatarelatedtoperformanceoftheprocurementsystem

andtoreportregularly.

14.SomeagenciesandLGUsarenotmaintainingrecordstovalidatedata.

CURRENT ACTIVITIES/ACTIONS TO BE UNDERTAKEN

a)Done -implementationofProcurementManualinallagenciesandharmonizationwith

donors.

b)To be done–(i)strengthentheinternalcontrolmechanismatagencylevelby:

enforcingthelawthatmandatescreationofinternalauditunits;(ii)prepareinternal

auditmanualonprocurement;and(iii)implementationofatrainingprogramfor

internalauditors.

a)To be done-intensiveinformationdisseminationandfamiliarizationonthenew

lawtotheprivatesectorandcivilsocietytobringtrustandconfidenceinthenewsystem.

b)To be done-supporttoprivatesectorinitiativesontrainingsonthenewsystem.

c) To be done-includeprivatelearninginstitutionsinaccreditationofprocurement

traininginstitutestocatertoprivatedemand.

d)To be done-issuanceofapolicythatadvertisementsshouldincludekeyevaluation

criteria.

a)Ongoing.ImplementtheGuidelinesforSuspensionandBlacklistingofBidders,

SuppliersandConstructors.DonorswillreviewforpossibleadoptioninFAPs.

b)To be done-StrengthentheroleofPresidentialAnti-GraftCommissioninensuringthat

procurementauditisinstitutionalizedthroughtheinternalauditunitsofeachagency.

Trainingonfraudexaminationandaudit.

c)To be done–(i)COAshouldincludeaspartofitsAnnualReportanassessment

ofadequacyofinternalcontrolmechanisminweakagencies;and,(ii)trainingof

investigatorsonfraudexaminationandaudit.

d)To be done–ProvideactiveassistancetoOmbudsmanforsuccessfulprosecutionof

procurementcases.

To be done–Agenciesshouldinstituteadequateinternalcontrolmechanismtoensurethat

timelyinformationareprovidedtoagencymanagement.LinktoNo.10.

a)Ongoing.SupporttoPWIinimprovingtrainingdesignanddeliveryforBACcivilsociety

observers(CSOs).

b)To be done-InformationsupportsystemfortrainedBACCSOs.

c)To be done-AdministrativesupporttothenewcoalitionofBAC-CSOs.

LinktoNo.3.

To be done-Issuanceofguidelinesforproperrecordmanagementfornationalagencies

andLGUs.PreparetheTORandhireconsultant.

RESPONSIBLE AGENCIES, FUNDING AND TIMETABLE

a)ProcurementManualissuedin

January2007;Pilottestingin6

agenciesdone.

b)IDFGrantonStrengtheningInternal

Auditon-going;IAmanualbeing

drafted).

CommunicationPlantobedeveloped

andimplementedbyGPPB,asagreed

inthisCPAR.

a)&b)Done.Guidelinesbeing

implemented.Listofblacklisted

suppliersandcontractorspublished

intheGPPBwebsite

(www.gppb.gov.ph).

c)COAwilldevelopandimplement

ProcurementAuditGuide.

d)trainingofOmbudsmanstaff

carriedinthisCPAR.

DBM,underAusAIDfunding,is

developinginternalcontrolsystem.

TheseactionsarecarriedinthisCPAR

aspartofCommunicationStrategy.

CarriedinthisCPAR.

CarriedinthisCPAR

87

Annex �0: Key Source Documents

DevelopmentAcademyofthePhilippines,December2006.“Anti-CorruptionInitiativesinthePhilippines:CreatingVirtuousCirclesofIntegrityandAccountability,”ManilaPhilippines.

C.Virata&Associates,Inc..,May2006.“StudyonDesignandCostAnalysisofJBICODALoan-AssistedProjectsinthePhilippines,”Makati,Philippines.

Campos,J.Edgardo&JoseLuisSyquia,2006.“ManagingthePoliticsofReformOverhaulingtheLegalInfrastructureofPublicProcurementinthePhilippines,”WorldBankWorkingPaperNo.70.

Joint Document of the Government of the Philippines, The World Bank and the Asian Development Bank,Philippines,April30,2003.“ImprovingGovernmentPerformance:Discipline,EfficiencyandEquityinManagingPublicResources,APublicExpenditure,ProcurementandFinancialManagementReview,”Manila,Philippines.

OECD-DAC/WBProcurementRoundTable,January2005.“GoodPracticePapersonStrengtheningProcurementCapacitiesinDevelopingCountries”

OECD-DAC/WBProcurementRoundTable,July17,2006.“MethodologyforAssessmentofNationalProcurementSystems,Version4”

PhilippineCommissiononAudit,January2007.“AssessmentoftheLevelofImplementationofRepublicActNo.9184intheLocalGovernmentUnits,”QuezonCity,Philippines.

Philippine Country Team, World Bank East Asia and Pacific Department, June 21, 2007. “Country AssistanceStrategyProgressReport,”Manila,Philippines.

SocialWeatherStation,November2006.“PublicOpiniononProcurementReforms,”QuezonCity,Philippines.

SocialWeatherStation,June2007.“TransparentAccountableGovernance:The2007SWSSurveyofEnterprisesonCorruption,”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 ChildhoodDevelopmentProject,”TheWorldBank,WashingtonDC.

88

1818 H Street, NW, Washington, DC 20043 USAWebsite: www.worldbank.org

World Bank Office Manila23rd Floor, The Taipan PlaceF. Ortigas Jr. Road, Ortigas CenterPasig City PhilippinesTelephone: (63-2) 637-5855Website:www.worldbank.org.ph

International Finance Corporation11th Floor, Tower One, Ayala TriangleAyala Avenue, Makati City PhilippinesTelephone: (63-2) 848-7333Website: www.ifc.org

The World Bank in the PhilippinesSupporting Islands of Good Governance

PHILIPPIN

ES CO

UN

TRY PR

OC

UR

EMEN

T ASSESSM

ENT R

EPOR

T