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

	Table 3: Profile of Companies That Took Part in Biddings Rejected by the World Bank * Offered winning bids ** Partial figures only as some government agencies do not report all projects COMPANY COUNTRY NUMBER OF TIMES IT TOOK PART IN NRIMP BIDS REJECTED BY WB TOTAL WORTH OF FOREIGN-ASSISTED PROJECTS WON FROM 2004-2006 AS REPORTED BY CIAP-PDCB** (P million) % SHARE RANK China Road* China 7 3,180 4.8% 7 Cavite Ideal Philippines 4 4,102 6.2% 4 China Wu Yi* China 3       China Geo* China 2 1,965 3.0% 12 CM Pancho Philippines 2 2,479 3.7% 10 Dongsung Korea 2       Hanjin Korea 2 5,383 8.1% 2 Italian Thai Thailand 2       Shinsung Korea 2 1,480 2.2% 14 China Harbor China 1       China IWEC China 1 3,101 4.7% 8 China State* China 1 4,932 7.5% 3 Daewoo Korea 1 3,871 5.9% 5 Sammi Construction Korea 1       Suzaka Japan 1       TOTAL     30,494 46%

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

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

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

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

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

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

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

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

	Poblacion Bridge in Makilala, North Cotabato, is a costly P17.5-million affair that straddles an impassable road. [photo courtesy of Sinag ng Bayan Foundation]

This opened up the bidding to more contractors — to no avail. The winner in the second bidding, China Road and Bridge Corp., a Chinese state-owned firm, had also clinched the first bidding for a section of the Surigao-Davao coastal road project in Mindanao. The other project component, the Kabankalan-Basay section in Negros Island, was won by a joint venture of China Road and local contractor EC Luna, which also figured as a winner in the first bidding (though its partner then was China State Construction Corp.).

When the World Bank again rejected the bids, the DPWH made more changes for the third bidding. The Negros island project was divided into two smaller packages. Instead of just one, two complaint hotlines were established — at the World Bank country office and the Government Procurement Policy Board. “We were very strict,” says Molano. “If a bidder lacks a document, we disqualify it.”

The results were a little different for the third bidding held in 2006. China Road, which previously won the Surigao-Davao section, bagged one of the two components of the Negros road project. But two new bidders, China Wu Yi Corp. and China Geo Engineering Corp., won the two other projects.

Still, the World Bank rejected the results due to what it called “strong signs of collusion and excessive pricing.” Bank officials did not explain what that meant but a person familiar with the investigation said a disgruntled supplier had reportedly written the Bank a “poison letter” outlining plans by bidders for manipulating the auction.

All the bids in the third round were higher than the DPWH’s estimated cost. Also, all the bids, save for the lowest, clustered around a high number, a possible but not conclusive sign that the bidders were helping one of them win the contract.

The PCIJ wrote letters and made calls to all the companies involved but most did not respond to requests for comment. Hanjin, in an email, said the company's officials “are not aware of any allegations of collusion and excessive pricing.”