UPDATE - World Banksiteresources.worldbank.org/INTPHILIPPINES/Resources/cpar-update.pdf · The CPAR Update report was prepared in ... Commission on Audit CPAR ... Following the completion

UPDATE

February 2004

COUNTRYPROCUREMENTASSESSMENT

REPORT

Phi l ippines

Country Operations and Services UnitEast Asia and Pacific Region

February 2004

THE WORLD BANK

UPDATE

Regional Vice President : Jemal-ud din Kassum, EAPCountry Director : Robert Vance Pulley, EACPF

Sector Director : Marisa Fernandez-Palacios, EAPCOTask Team Leader : Christopher Hoban, EACPF

Contents

Foreword -------------------------------------------------------------------------------------------------- 10

Overview--------------------------------------------------------------------------------------------------- 12Big Progress in Procurement Reform ---------------------------------------------------------------12Review of the June 2002 CPAR Agenda -----------------------------------------------------------13Emerging Issues/Priorities -----------------------------------------------------------------------------13Discussions with the Private Sector -----------------------------------------------------------------14Meeting with the GPPB and Next Steps -----------------------------------------------------------14

TableTable 1: Status of Recommendations in the March 2003 CPAR -----------------------------13

Appendices

Appendix 1 - List of CPAR Update Mission Participants and Persons Met ----------------16Appendix 2 - Summary of Achievements and Status of Key Recommendations of March 2003 CPAR ------------------------------------------------------------------------------------18Appendix 3 - Emerging Issues/Priorities------------------------------------------------------------26Appendix 4 - Procurement Side Letter Draft 12/09/03 ------------------------------------------28Appendix 5 - CPAR March 2003 ---------------------------------------------------------------------30

Acknowledgements

The CPAR Update report was prepared in December 2003.The Team comprised Cecilia Vales (Coordinator); Rene Sd.Manuel (Procurement Specialist for Public Works); DominicAumentado (Procurement Specialist for Education); NoelSta. Ines (Procurement Specialist for Health); Harbaksh Sethi(Consultant) and Evelyn Quirante (Secretarial Support). TheTeam worked with representatives from the AsianDevelopment Bank, Mr. Jimmy Wu, Portfolio Manager andCesar Valbuena, Procurement Specialist, and the Japan Bankfor International Cooperation, Izuru Kimura, Representativeand Mayumi Endoh, Representative.

The Team collaborated closely with the Government’sTechnical Working Group for Procurement Reform led byLaura Pascua (Undersecretary, Department of Budget andManagement); Jose Luis Syquia (Acting ExecutiveDirector, Government Procurement Policy Board, TechnicalServices Office); Teodoro Encarnacion (PresidentialAssistant on Procurement Concerns); Juan Miguel Luz(Undersecretary, Department of Education); Jose Lazo(Chief, Procurement Division, Department of Health);Arcadio Cuenco (Assistant Commissioner, Commission onAudit); Austere Panadero (Assistant Secretary, Departmentof Interior and Local Government); Elmer Dorado (OIC,Social Infrastructure Division, National Economic andDevelopment Authority); and Cipriano Ravanes (President,Procurement Watch, Inc.).

The Update Report was submitted to the GovernmentProcurement Policy Board and was approved in its meetingof December 11, 2003. The Board was chaired by SecretaryEmilia Boncodin of the Department of Budget andManagement and alternately chaired by Director GeneralRomulo Neri of the National Economic and DevelopmentAuthority.

This Report is a follow-up of the original CPAR, whichwas part of the Public Expenditures, Procurement andFinancial Management Review. The original CPAR wasprepared in June 2002 and published in March 2003, by a Teamled by Christian A. Rey (Task Team Leader).

Publication review and advice were received from LeonoraGonzales (External Relations Officer) who also acted asCommunications Adviser.

Christopher HobanManager, Portfolio and OperationsManila, Philippines

Acronyms and Abbreviations

ADB - Asian Development Bank

AIM - Asian Institute of Management

AO - Administrative Order

BAC - Bids and Awards Committee

BSP - Bangko Sentral ng Pilipinas

BOT - Build-Operate-and-Transfer

CIAP - Construction Industry Authority of the Philippines

CDF - Countryside Development Fund

CIDA - Canadian International Development Agency

COA - Commission on Audit

CPAR - Country Procurement Assessment Report

CPPR - Country Portfolio Performance Review

CSC - Civil Service Commission

DBM - Department of Budget and Management

DepEd - Department of Education

DILG - Department of the Interior and Local Government

DOJ - Department of Justice

DOH - Department of Health

DPWH - Department of Public Works and Highways

DTI - Department of Trade and Industry

EO - Executive Order

EPS - Electronic Procurement System

GAAM - Government Accounting and Audit Manual

GEF - Global Environment Facility

G-EPS - Government Electronic Procurement System

GFI - Government-Financing Institution

GOCC - Government-Owned and/or Controlled

Corporation

GOP - Government of the Philippines

GPIS - Government Procurement Information System

GPPB - Government Procurement Policy Board

GPRA - Government Procurement Reform Act

ICB - International Competitive Bidding

INT - Department of Institutional Integrity

IRRs - Implementing Rules and Regulations

JBIC - Japan Bank for International Cooperation

LC - Letter of Credit

LCE - Local Chief Executive

LGU - Local Government Unit

LOI - Letter of Instructions

NBI - National Bureau of Investigation

NCB - National Competitive Bidding

NGA - National Government Agencies

NGO - Non-Government Organization

NEDA - National Economic and Development Authority

OSG - Office of the Solicitor General

PCAB - Philippine Constructors Accreditation Board

PEAC - Pre-qualification, Evaluation and Awards Committee

PD - Presidential Decree

PPB - Procurement Policy Board

PSB - Philippines Shippers’ Bureau

PS - Procurement Service

PWI - Procurement Watch, Inc.

TIP - Transparency International Philippines

TTL - Task Team Leader

TWG - Technical Working Group

WB - World Bank

WBOM - World Bank Office Manila

WG - Working Group

10COUNTRY PROCUREMENT ASSESSMENT REPORT UPDATE

Foreword

The first Country Procurement Assessment Report (CPAR)was completed in June 2002 and published in March 2003.This CPAR has served as an analytical tool to help assess thepublic procurement system in the Philippines and in the pro-cess helped to generate a dialogue with the Government toimprove procurement practices, and to help civil society andthe private sector understand better the current processesand procedures in place. The June 2002 CPAR has been akey instrument in helping the government, its key develop-ment partners and other stakeholders to focus on procure-ment practices and key reform measures. Thus the November2003 CPAR Update was a joint effort of the Government andthe World Bank, with close collaboration from the Asian De-velopment Bank and the Japan Bank for International Coop-eration. It was officially accepted by the Government onDecember 11, 2003 and the publication was cleared on Feb-ruary 5, 2004. It is but fitting, therefore, to properly acknowl-edge the key contributors to the success of the CPAR Updateprocess in a dedicated acknowledgement section of this Re-port.

The CPAR Update Mission reviewed the status of thereforms, and found that over 50% of the recommendationsfrom the first CPAR have been completed, and another 26%are in progress. The key accomplishments include thepassage and promulgation of the Government ProcurementReform Act (Republic Act No. 9184) and its implementingrules and regulations (IRR), the establishment and immediatefunctioning of a powerful Government Procurement PolicyBoard (GPPB) and its Technical Services Office, mandatoryimplementation of electronic procurement systems, a well-defined complaint mechanism and blacklisting procedures,provision for civil society monitoring, reasonableprocurement audit provisions, numerous dissemination andtraining activities, and near-completion of harmonized biddocuments and manuals.

It is worth particularly noting that the new procurement policyhad institutionalized the participation of civil societyorganizations in all bids and awards committees thusenhancing the integrity of the bidding process. Moreover,

the GPPB has already taken concrete steps towards buildingthe capacity of civil society organizations on the newprocurement rules and regulations.

In support of this initiative, the 2003 CPAR mission activitiesincluded discussions with the Council of EngineeringConsultants of the Philippines and the Philippine ConstructorsAssociation to ensure that their concerns are included in thepursuance of the reform agenda.

There is still much to be done however. This Update identifiesseveral emerging priorities including the perception of highcost of some works and goods, and the eligibility of Philippinefirms to compete for internationally financed contracts.Significant progress has been made in implementing anelectronic procurement system, but further development nowneeds to be pursued. Finally the new rules and proceduresneed to be widely disseminated and training given to localgovernments, the private sector and civil society. Therefore,the primary focus of the CPAR Update is to identify newactivities to achieve these objectives including establishingpartnerships and funding requirements for partnerships withinternational organizations, and to achieve better governanceand better value for money.

Finally, we wish to commend the executive and legislativebranches of government for pursuing a key governancemeasure that will reduce corruption in the long term. Muchnow will depend on how these key institutional and policyreforms will be implemented, monitored and enforced on asustainable basis, towards achieving good governance.

Robert Vance PulleyCountry Director, PhilippinesWorld Bank Office ManilaFebruary 2004


Overview

Following the completion of the Country ProcurementAssessment Report in June 2002, which was publishedin March 2003, there has been a great deal of progressin pushing procurement reform in the Philippines. ThisCPAR Update was undertaken in November-December2003 to take stock of achievements so far, and to reviewthe priorities for further action in procurement reform.

Discussions were held between the World Bank andthe Government in November 2003 to review the statusof actions identified in the first CPAR which wererecommended and taken, and to discussrecommendations for future actions to carry forwardthe reform process. The Japan Bank for InternationalCooperation (JBIC) and the Asian Development Bank(ADB) also joined key meetings. The Bank MissionTeam met with other key stakeholders such as theCouncil of Engineering Consultants of the Philippines,the Philippine Contractors Association, ProcurementWatch, Incorporated and the Philippine Center forInvestigative Journalism. The list of participants to theMission and persons met by the Mission Team ispresented in Appendix 1. In a wrap-up meeting heldon December 11, 2003, the key findings andrecommendations were discussed with the GovernmentProcurement Policy Board (GPPB) chaired bySecretary Boncodin.

Big Progress in Procurement Reform

Laudable achievements have been made in theGovernment’s agenda for procurement reform in thepast year, as follows:

l Passage and promulgation of the Government Pro-curement Reform Act (GPRA) on January 10, 2003(Republic Act No. 9184). The Law consolidatesthe more than sixty laws pertaining to public pro-

curement and institutionalizes transparency mea-sures including the use of electronic procurementand the participation of Civil Society Organiza-tions. The Law covers all national agencies, gov-ernment owned and controlled corporations, allgovernment entities and instrumentalities.

l The inclusion of all Local Government Units inthe coverage of the Government ProcurementReform Act.

l The issuance of Implementing Rules and Regula-tions (IRRs) for the Law on October 8, 2003.

l The creation of the Government ProcurementPolicy Board vested with sole authority to overseeprocurement reform and protect the national inter-est in all matters affecting public procurement. ATechnical Support Office was created by the Imple-menting Rules and Regulations to undertake theday-to-day operations of the GPPB in the perfor-mance of its duties and responsibilities in policymaking, monitoring compliance, and training andadvocacy.

l Mandatory use of the Government Electronic Pro-curement System (G-EPS) for the procurement ofcommon supplies and to promote transparency andefficiency through the establishment of a centralgovernment procurement web site to be the primarysource of information on all government procure-ment transactions. Initially, this has involved theposting of bid invitations and awards in the pro-curement web site.

l The monitoring and enforcement of procurementrules as well as ensuring efficiency and effective-ness for each step of the procurement processthrough procurement audit.

l The provision of penal sanctions against violatorsof the Law, and its rules and regulations.

l The development of a procurement manual andstandard bidding documents and forms (harmo-


nized with thosse of the major international financ-ing institutions: World Bank, ADB and JBIC) tofacilitate compliance with the new law.

Review of the June 2002 CPARAgenda

The CPAR was a comprehensive document that coveredthe entire public procurement system of the countryplus an in-depth study of three sectors: Public Works,Education and Health. It contained fiftyrecommendations and agreed actions. Responsiblegovernment agencies reported on the status ofcompletion of each agreed action. These agreed actionswere classified into (a) national and local governments,and (b) the three sectors. The detailed statusarepresented in Appendix 2. Most of therecommendations have either been completed (58%)or are on-going (26%). The data in Table 1 providesan overview.

Some activities that are still to be completed relateto:

l Professionalization of the procurement function;

l Corporatization of procurement services;l Study on securities and bank guarantee;l Streamline and reducing delay in registration and

licensing procedures;l Establishment of record keeping systems at the

LGU level; andl Eligibility of textbooks with foreign authors

(Science, Math and English).

Emerging Issues/Priorities

Several new issues emerged which were not includedin the June 2002 CPAR. These arose from ongoingdiscussions with government, and issues that arose fromthe completed activities. For example:

l Some key priorities identified by Governmentinclude the apparent high cost of some works andgoods procured by Government and the eligibilityof Philippine firms to compete for internationallyfinanced contracts;

l It was also noted that government has madeconsiderable progress in electronic procurementsystems and further development now needs to bepursued; and,

l With the passage of the new Law, issuance of theImplementing Rules and Regulations andcompletion of harmonized bid documents, a majorchallenge is to disseminate the new rules andprocedures, and provide training at all levelsincluding local government units, the private sectorand in civil society.

The focus of the CPAR Update therefore is on newactivities to achieve these objectives. Discussions wereheld on how to implement funding requirements and toexplore possible opportunities for partnerships withinternational organizations. There was a strong senseof commitment among the various organizations towork together to follow-up on the strong momentumfor procurement reform–to achieve better governanceand better value for money for public spending in thePhilippines. Some of these partnerships are reflectedin the joint responsibilities shown in the matrix inAppendix 3. Important priorities that were identifiedare:

l Disseminate information on Government Procure-ment Reform Act/Implementing Rules and Regu-

National/Local Levels 15 7 5 27Sectoral Levels 14 5 4 23

29 12 9 50

Completed On-Going Open TOTAL

Table 1: Status of Recommendations in the March2003 CPAR


lations to all stakeholders including local govern-ments, the private sector and civil society;

l Implement E-Procurement as a transactional tool;

l Preparation of a report on capacity, quality and sizeof contracts for works;

l Training on harmonized bidding documents at alllevels including national agencies, local govern-ments, the private sector and civil society;

l Introduce a system of value engineering analysison a pilot basis to check that designs and cost esti-mates ensure best value for money;

l Pilot “design and build” procurement schemes inat least one contract; and

l Capacity Building of Civil Society Organizations(CSOs).

Discussions with the PrivateSector

The discussions with the Philippines ContractorsAssociation and the Council of Engineering Consultantsof Philippines (CECOPHIL) indicated some positiveelements in the introduction of the GPRA and IRRs.The discussions disclosed some serious concernsrelating to:

l Qualification criteria for short listing of consult-ants and contractors, especially under contractsfunded by International Financing Institutions;

l Transparency of the pre-qualification/eligibility andevaluation processes;

l Lack of interest of contractors to participate in pro-vincial procurement as a result of provincial pref-erence provisions;

l Capacity building of Civil Society Organizationswith extended participation as observers in the Bidsand Awards Committees;

l Adjustment of prices of contracts with long comple-tion periods;

l No clear mechanism in submitting a legitimate pro-test; and

l Hiring only of international firms as coordinatingconsultants.

These are legitimate concerns, which need to beaddressed in the on-going efforts of the government toensure an efficient, transparent and open competitiveprocess, however, it appears that almost all of theseissues had been addressed in the Law and in theImplementing Rules and Regulations. Further, someof them are likewise considered in the procurementmanuals and harmonized bidding documents. Whatappears to be lacking is the dissemination of informationand training of the private sector and civil society. Theseactivities are included in the emerging issues/prioritiespresented in Appendix 3.

Meeting with GPPB and NextSteps

In a meeting held on December 11, 2003, the GPPBand the Bank agreed on the following next steps:

l Appointment of the new Executive Director ofTSO-GPPB soonest. The new TSO Executive Di-rector is on board.

l Issuance of harmonized bid documents with neces-sary forms.

l Responsible Agencies will implement agreed ac-tions on dates specified. Progress will be monitoredjointly by the TSO-GPPB and the World Bank.

l International partners will make the promised as-sistance available. A request for ASEM 2 funds isbeing processed internally by the World Bank.GPPB will discuss with other donors possible as-sistance.

l Finalize World Bank Procurement Side Letter. TheTSO-GPPB, DOF and NEDA representatives willstart discussing the draft Side Letter, included asAppendix 4.

The March 2003 CPAR can be found in Appendix 5.


Appendix 1 - List of CPAR Update Mission Participants and Persons MetGovernment/GPPB

Emilia Boncodin, Secretary, DBMRomulo Neri, Director-General, NEDALaura Pascua, Undersecretary, DBMAustere Panadero, Assistant Secretary, DILGTeodoro Encarnacion, Presidential Assistant on Procurement ConcernsArcadio Cuenco, Assistant Commisioner, COAEstanislao Granados, Assistant Secretary, DBMJose Luis Syquia, Acting Executive Director, GPPB – TSOReynaldo Bicol, GPPBPia Zobel Ruiz, GPPBAlexander Padilla, GPPBGenmaries Entredicho, GPPBJun Molano, GPPBDennis Nacario, GPPBMila Manalastas, GPPB

Asian Development Bank

Cesar Valbuena, Procurement SpecialistJimmy Wu, Country Portfolio Manager, Philippines

JBIC

Izuru Kimura, RepresentativeMayumi Endoh, Representative, JBICYasushi Tanaka, Senior Representative, JBICCatherine Vidar, Project Officer, JBIC

World Bank

Christopher Hoban, Manager, Portfolio and OperationsCecilia Vales, Sr. Procurement SpecialistRene Manuel, Procurement SpecialistNoel Sta. Ines, Procurement SpecialistDominic Aumentado, Procurement SpecialistChris Pablo, Operations OfficerHarbaksh Sethi, Procurement ConsultantJeff Taylor, Consultant, WBEvelyn Quirante, Program Assistant

Guest Participants

Juan Miguel Luz, Undersecretary, DepEdKenneth Ronquillo, OIC, HHRDB, DOHJoel Lazo, Chief, Proc. & Logistics, DOHElinore Lavilla, Supervising Auditor, COAKatherine dela Cruz, OIC, CIAPLilian Salonga, OIC-Research & Info Div., CIAPEmerson Benitez, Chief, BAC-DPWHJose Bautista, DILG


Procurement Watch, Inc.

Jacinto Gavino, ChairmanRamon Ereneta, PresidentCipriano Ravanes, Executive Director

Council of Engineering Consultants of the Philippines

Eric Ruiz, PresidentVirgilio Madrazao, TreasurerIsaad David, DirectorDanilo Luzentales, DirectorRolando Roque, Past PresidentLani Pimentel, Administrative Officer

Philippine Constructors Association, Inc.

Emilio Tumbocon, President

Philippine Center for Investigative Journalism

Ms. Yvonne Chua

Appendix 2 - Summary of Achievements and Status of Key Recommendations of March 2003 CPAR

completed

ongoing

Key Area Activity and Agreed Action Responsible Agency Timetable Status as of October 31, 2003 Funding

PUBLIC PROCUREMENT BY NATIONAL AGENCIES, Government-Owned-and-Controlled Corporation and other Instrumentalities

Strengthen 1. Passage and promulgation of an Department of Budget December 2002 Done. USAIDLegal and Omnibus Law on Procurement. and Management The Law was issued on FebruaryPolicy Framework 10, 2003.

2. Prepare implementing rules and Government Procurement Done. USAID/regulations after enactment of the Policy Board The Implementing Rules and ADBLaw and preparation of Philippines Regulations-A was issuedBidding Documents and Forms. September 23, 2003 and

became effective October8, 2003.

3. Update Government Accounting Commission on Audit December 2003 Done.Audit Manual to include the new Government Procurement ReformProcurement Law. Act circularized as part of Audit

Rules.

4. Develop a training program for Commission on Audit December 2003 On-going.auditors on the Law, its Implementing Training program on Law/Rules and Regulations and Procurement Implementing Rules andBidding Documents and Forms. Regulations developed; training

of auditors (6 regions) completed.

Strengthen 5. Establish the Government Procurement Department of Budget June 2003 Done. WB-IDIOrganization and Policy Board. and Management The Board was convened onStaffing February 4, 2003 as mandated by law.

6. Conduct a study on the scope of work Department of Budget Done.of the Government Procurement Policy and Management/ The Government ProcurementBoard. Government Procurement Policy Board established by the

Policy Board -Technical Law which defines its functions.Services Office



Strengthen 7. Establish a national training program Government Procurement June 2004 On-going. WB-IDFOrganization for the new public procurement system. Policy Board Regional trainings on the Law (ASEM 2and staffing In-depth training needs to be conducted. and the Implementing Rules and Grant);

Regulations being conducted by the GovernmentGovernment Procurement to pursuePolicy Board. First round of training funding fromof national agencies completed; ADB intraining for LGUs started. December

CPRMU

8. Professionalize the procurement function: Government Procurement December 2003 The Terms of Reference submitted WB IDF;Policy Board/Civil Service by Government Procurement Policy ASEM 2 Grant

q Prepare a Study Commission Board-Department of Budget and will cover 5Management; completion by pilot agencies

q Implementation (NGA) PRC September 2004.

9. Study to corporatize Procurement Department of Budget and June 2003 Procurement Service is CIDA/WB IDFService as independent entity. Management-Procurement implementing the Government-

Service Electronic Procurement Systemand reengineering its systemsand procedures. The Terms ofReference for the corporatizationbeing drafted; completion of study byDecember 2004.

Improve Procurement 10. Enforce the regulation on transparency Commission on Audit December 2004 On-going. GovernmentPractices and through procurement audit. Training on the Law and the to pursueProcesses Implementing Rules and funding from

Regulations. Traininng on ADB inProcurement Bidding Documents Decemberand the Procurement Manual will CPRMUbe required for auditors.

11. Enforce processing lead time through Commission on Audit June 2004 Done. IFIs willapplication of sanctions and monitoring Section 38 of the Law mandates conductthrough procurement audit (Administrative leadtime for key steps. Commission brief ing withOrder 129). Audit Procedure. Commission

on Auditauditorsleadtimes forForeign-AssistedProjectsProcurement



12. The Implementing Rules and Department of Budget June 2003 Done.Regulations of the law should prohibit and Management—Procurement The Law does not allow fornegotiation of price and contract amount Services negotiation of price and contract(goods and works) after bid opening (IRR). amount.

13. Develop a framework and guidelines Department of Interior and December 2002 Done. ASEM Grantfor Congressional insertions and Local Government/Department Study and framework submitted byConstituency Development Fund. of Budget and Management/ consultants. Needs follow-up

League of Cities activities to explore possibility q Terms of Reference prepared of enhancing audit by the

and submitted by Department Commission on Audit andof Interior and Local Government monitoring by the Procurement

Watch, Inc./Government-watch/Philippine Center for InvestigativeJournalism/other NGOs.

14. Price monitoring to be included as an Government Procurement June 2003 PS regularly monitors commonly-important function of Oversight Board (IRR). Policy Board-Technical Services used supplies. For others to be

Office/Procurement Service completed by June 2004.

15. The Civil Service Commission or the Department of Budget and June 2003 Done.Office of the Solicitor General to provide Management The Law provides for legalsupport to members of the Bid and assistance and indemnification ofAwards Committee/Procurement Evaluation Bids and Awards Committeeand Awards Committee subjected to members.harassment.

16. Develop on demand satisfactory World Bank December 2003 To be completed by June 2004securities to be issued by non-banking (together with No. 17).institutions. Improve penalities in lieu of bidsecurity for small contracts.

17. Replace surety bond with Bank Government Procurement June 2003 Done.guarantee/Leters of Credit/other forms. Policy Board The Implementing Rules and

Regulations specify options.

Enhance 18. Push for 60% implementation by all Department of Budget and December 2003 On-going.Transparency agencies of Government Electronic Management/Procurement As of October 31, 2003, 100% for

Procurement Services Rule. Services Government-owned ControlledCorporations and 61% of nationalagencies were registered. To becompleted in accordance with theImplementing Rules andRegulations. The GovernmentProcurement Policy Board tomonitor and report on compliancequarterly.

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19. Encourage guidelines and training of Procurement Watch, Inc./ December 2002 On-going. Initial fundingcivil society’s participation in procurement Transparency International Phils. Procurement Watch, Inc., invited by ASEMat all levels. to observe procurement processes

in one (1) government agency. Highdemand requires additional staffand training with workshops (funds).To be completed by December2004.

20. Develop guidelines and training of Procurement Watch, Inc./ December 2002 On-going. IDFNational Government Organizations and Transparency International Phils. One (1) workshop conducted toCivil Society. develop code of ethics and a

network for reporting. To becompleted by June 2004.

Public 21. Ensure that Local Government Units’ December 2002 Done.Procurement procurement is adequately covered in

proposed Procurement Bill.

22. Local Government Units’ concerns/ Department of Interior and December 2002 Done.views to be represented in the formulation Local Government/League ofof the Implementing Rules and Regulations Citiesonce the Bill is enacted.

23. Local Chief Executives should not Department of Budget and December 2002 Done.chair the Bidding and Awards Committees. Management The Law prohibits approving

authority to be chair of the Bidsand Awards Committee.

24. Make the implementation of Annual Department of Budget and June 2003 Done.Procurement Plan by the Local Management Circular Section 7 of the Law requiresGovernment Units mandatory. Annual Procurement Plan linked

to Budget.

25. Professionalize the procurement Government Procurement December 2003 Study to become phase 2 of the IDFfunction and build Local Government Units- Policy Board/Department of Professionalization Study inlevel procurement capacity. Interior and Local Government Activity No. 8; to be completed

in March 2005.

q Develop a Study

q Implementation

LOCAL GOVERNMENT UNIT PROCUREMENT


LOCAL GOVERNMENT UNIT PROCUREMENT

26. Rationalize method of procurement and Department of Budget and 60 days from Done.expedite payment to contractors and Management/Government approval of New Rules on alternative methods ofsuppliers (to be dealt with in the Implementing Procurement Policy Board Procurement Law procurement provided in SectionRules and Regulations). 48 of Implementing Rules and

Regulations.

q Update the Government Commission on Audit December 2003 Government Procurement ReformAccounting and Audit Manual Act and Implementing Rules and

Regulations circularized asAudit Rules.

q Develop and implement training Commission on Audit June 2003 On-going; to be completed byprogram on procurement audit December 2004.

27. Develop a good record keeping system Government Procurementfor: Policy Board/Department of

Public Works and Highways/ q Provincial/cities (pilot phase) Department of Interior and December 2004 To be completed by December 2004.

Local Government q Municipalities (full implementation) December 2004 To be completed by December 2004.


PUBLIC WORKS SECTOR

Policies and 28. Foreign contractors should be allowed DPWH/CIAP June 2003 The Contractors Licensing LawProcedures to bid without PCAB license but will need prohibits this. However, the process

to present the license prior to award. is being streamlined. Furtherelaboration required to facilitateparticipation of bidders.

Legal 29. Review the law on arbitration so as to CIAP/DPWH June 2003 Enhancement of existing LawFramework align it with international practice. based on UNCITRAL model is

being considered. This requiresin-depth study. Needs technicalassistance for the study.

Improve 30. Study on registration and licensing GPPB/DPWH/CIAP-PDCB June 2003 To be completed. NeedsProcurement of contractors; design and implement an assistance to streamline.Practices and action plan to streamline processes forProcesses registration and licensing of contractors.

Evaluation of 31. Adopt the standard pass or fail criteria DPWH/ADB June 2003 Done.Bid Awards for all procurement except pre-qualification

of ADB-funded projects which will also bescheduled to adopt pass or fail criteria in2002.

- do - 32. Standard estimated cost per classroom, DPWH June 2003 Done.for budgetary purposes, should not be alimitation to the resulting bid price.

Delivery, 33. Provide/strengthen quality assurance DPWH June 2004 Needs assistance.Inspection, mechanism for design and supervision.Payment

Enhance Transparency 34. Use of computerized registry by all DPWH December 2004 On-going.projects following progress of Pilot test on two WB-fundedof computerization. projects under implementation.


EDUCATION SECTOR

Legal Framework 35. Revise Section 1-A, Rule IV of IRR of DepED December 2003 Done.and Policy RA 8047 and General Policy No. 5 of

the National Book Policy to relax itsrequirements on importation of rawmaterials for textbooks.

- do - 36. Amendment of the law to allow DepED December 2004 Because of the new curriculum,textbooks of foreign authors to compete this activity needs to be pursued.locally for Science, Math and Englishtextbooks.

- do - 37. Streamline the policy on textbook DepED Done. Further improvements withcontent evaluation. the new textbook policy (English,

Math and Science).

Organization 38. Training and empowerment of the bid DOH/SEMP2/All Agencies December 2003 Done.committee members (proffessionalization). BAC members to AIM

procurement training.

Planning and 39. Develop an effective procurement DepED June 2003 On-going with implementation ofMonitoring planning and inventory monitoring system system at all levels (except school)

at the Regional, Division, District and School to be completed in December 2003.Levels. Procurement process at “school”

level is “open”.

Capacity Building 40. Strengthen DepEd’s procurement DepED June 2003 Consultant hired through DBM;capacity. completion December 2003.

Establishment of ProcurementService Unit.


HEALTH SECTOR

Organization 41. Review and implement Department of Department of Health December 2003 On-going.Health reforms in terms of decentralizationof procurement.

Advertisement 42. Develop a mechanism to ensure wider Department of Health/Social December 2003 Done.participation and competition Expenditure and Management Registration instead of accredidation

Project 2 and wider notification.

Capacity Building 43. Strengthen Bureau of Food and Drug’s Department of Health June 2003 Done.capacity to shorten the registration process. Instead of up to 6 months, now

2-3 weeks.

- do - 44. Training and empowerment of the bid Department of Health/Social December 2003 Done.committee members (professionalization). Expenditure and Management Staff sent to AIM training.

Project 2/All Agencies

Procedures and 45. Streamline the procedure for contract Department of Health/Social December 2003 Done.Practices review by Legal Services Division. Expenditure and Management One week instead of one month.

Project 2

- do - 46. Streamline the cash allocation process Department of Health/Social December 2003 Done.and approval process to avoid delay. Expenditure Management

Project 2

Monitoring 47. Develop a mecahnism to monitor and Department of Health/Social June 2003 Done for suppliers; forevaluate the performance of the suppliers, Expenditure Management constructors/consultants stillconstructors/consultants. Project 2 under preparation.

Organization and 48. Review the staffing of Procurement Department of Health/Social December 2002 Done August 2002.Staffing and Logistics Service. Expenditure Management

Project 2

Systems and 49. Establish a National Drug Price Department of Health/Social June 2003 Done November 2002.Procedures Monitoring System. Expenditure Management

Project 2

- do - 50. Conduct a study on price of Department of Health/Social December 2003 Done August 2003.pharmaceuticals. Expenditure Management

Project 2

Appendix 3 - Emerging Issues/Priorities

Strengthen 1. Prepare implementation plan for Monitoring Government Procurement June 2004 World Bank-InstitutionalOrganizational and Evaluation capability of the Policy Board Development Fund.Capacity Government Procurement Policy Board-

Technical Services Office with respect toenforcement of the GovernmentProcurement Reform Act/ImplementingRules and Regulations.

2. Disseminate information on Government Government Procurement March 2004 World Bank-InstitutionalProcurement Reform Act/Implementing Policy Board/Department of Development Fund;Rules and Regulations to Local Interior and Local Government Government to pursue additionalGovernment Units through a Joint Circular. funding from ADB.

3. Implement E-Procurement as a Government Procurement December 2004 Government to pursue fundingtransactional tool. Policy Board/Procurement with ADB.

Service

4. Training Government E-Procurement Commission on Audit/ December 2004Services staff and Commission on Audit Procurement Serviceauditors in the area of system security.

Improve 5. Prepare a report on capacity, quality and International Financing March 2004Procurement size of contracts for works under Foreign InstitutionsPractices and Assisted Projects, including the mix ofProcesses national and foreign funding.

6. Training on Harmonized Bidding Government Procurement December 2004 World Bank-InstitutionalDocuments at all levels including national Policy Board Development Fund and ASEM 2.agencies, local government, private sectorand civil society.

7. Prepare a report on bid prices/variation Government Procurement September 2004 Government will request Japanorders relative to Engineer’s Estimates in Policy Board/Department of Bank for Internationalprojects with and without fixed budget Public Works and Highways/ Cooperation funding.ceilings. Commission on Audit

8. Pilot testing of the Procurement Manual Government Procurement September 2004 ASEM 2 grant.in at least five (5) agencies/Local Government Policy Board/All Agencies/Units. Local Government Units

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Appendix 4 - Procurement Side Letter Draft - December, 2003

National Competitive Bidding Procedures

With respect to goods and works to be procured in accordance with the procedures referred to in paragraph1 of Part C of Annex 1 to Schedule 4, the National Competitive Bidding (NCB) procedures of the Borrower shallapply, except that, unless otherwise agreed by the World Bank (the Bank) in writing, the following proceduresshall apply:

Participation in Bidding

1. Foreign suppliers and contractors from eligible countries shall be allowed to participate, if interested,without first being required to associate with, or enter into joint ventures with, local firms. However,joint ventures will be encouraged.

2. For foreign suppliers and contractors, prior registration (such as with the Bureau of Food and Drugs forthe registration for drugs, agency accreditation, etc.), licensing (such as licensing by the PhilippineContractors Accreditation Board, etc.), and/or other government authorizations (such as a Mayor’s permit,etc.), shall not be a requirement for purposes of participating in bidding competitions. Such registration,licensing and/or other government authorizations may, however, be required from the selected bidder asa condition of signing of the contract, and the Borrower shall not be stopped from asserting such requirementwhere this is mandated under national law.

3. Except for major or complex works, as defined in this Loan Agreement, where prequalification is required,prequalification of contractors shall only undertaken upon prior Bank approval.

4. Eligibility screening may be carried out prior to bidding with prior Bank approval.5. If any bidder is to be denied access to the bidding process for reasons unrelated to its financial and

technical qualifications to perform the contract, prior Bank approval shall be sought.

Bid Documents

6. Suppliers and contractors shall not be required to purchase only local goods or supplies, or to hire locallabor, except for unskilled labor.

7. To obtain the best market prices available, open competitive bidding shall be maximized. For this purpose,requirements shall not include restrictive importation permits from private associations or protectivepreferences for Philippine Flag vessels.

8. Two-envelope system procedures shall not be used unless prior Bank approval has been obtained.

Advertisement

9. National Competitive Bidding (NCB) opportunities shall be advertised in national newspapers of generalcirculation, with sufficient time for bidders to prepare offers, which shall not be less than 30 days, unlessa different time is specifically agreed upon by the Bank. Posting shall also be done in the Government


Electronic Procurement System (GEPS) or the Procuring Entity’s website.

Bid Submission and Opening

10. Bid opening shall be open to those who wish to attend, and the deadline for submission of bids shall be thesame as that for bid opening. For goods, all bids received on time shall be opened and read publicly. Forworks, in addition to the bid, the following documents are read publicly: (a) bid security; (b) authority ofsigning official; (c) list of key personnel, (d) list of major equipment; and (e) credit line commitment.

11. Within 72 hours from bid opening, but prior to bid evaluation, a copy of the certified minutes of bidopening shall be furnished to the Bank, which shall contain the following: (a) names of the biddersprovided with bid documents; (b) original amount (unevaluated) of the bid of each bidder, as read;(c) date, time and place of bid opening; (d) summary of bid proceedings; and (e) names of the bidders’representatives and other persons present.

Evaluation

12. A ceiling may be applied to bid prices, with the prior Bank approval in advance of bidding. The ApprovedBudget Estimate used as ceiling shall be close to the Engineer’s Estimate.

13. The Bank’s domestic preferences shall not be applied in the evaluation of bids, and other preferences ineffect in the Philippines shall also not be used, except with prior Bank approval.

14. Price negotiation shall not be allowed. However, in the case of a budget limitation, an adjustment in thequantities of goods or the scope of work may be agreed upon, subject to the prior Bank approval.

15. Privileges granted to Provincial bidders to match the lowest bid submitted by a contractor with theprincipal office address outside the province in which the project is located, shall not be allowed.

16. Explicit bid evaluation criteria shall be set forth in the bid documents based on monetarily quantifiableelements.

17. Experience qualification of bidders shall be equal to two (2) projects that are at least 75% of the estimatedproject cost.

Contract Implementation

20. Modifications exceeding 15% of the contract amount and material changes in the conditions duringimplementation require prior Bank approval.

21. Arbitral award should be final and binding.


1.1 Recognizing that sound public procurement isan essential part of good governance, the Governmentof the Philippines (GOP) and the World Bank (WB)have agreed to conduct and pro-duce a country procurementassessment report (CPAR). Thiswill summarize the findings andagreed action plans to addressissues during the Bank’s fiscalyear 2002. The CPAR has beenrecognized by the GOP as an im-portant tool to pursue its objectiveof reforming the public procure-ment system. Key findings andrecommendations of the CPARhave been included in the Bank’sproposed Country Assistance Strategy 2003 to 2005for the Philippines.

1.2 A first joint assessment was conducted in1994, followed by another in 1997. Because manydifferences between procurement policies of the Bankand of the Government were noted, the 1997 CPARincluded the “side letter” which is currently being used

Overview

for all Bank loans to the Philippines. Even if the find-ings of the 1997 review (Table 1) were discussed indetail with GOP officials, the exercise was essentially

conducted by the Bank with noGOP ownership.

1.3 The current CPAR startedin October 2001 and was con-ducted by the World BankOffice Manila (WBOM) work-ing closely with the GOP desig-nated team. The joint workinggroup has assumed both co-responsibility and co-leadershipof the project with the participa-tion of the Asian Development

Bank (ADB). Since October, the working group orCPAR team has met weekly to analyze, discuss andendorse the consultants’ main findings. Mainly, thework has focused on: (i) Public Procurement Regime;(ii) Public Procurement in Practice; (iii) Procurementin Externally Financed Projects; and (iv) Initiatives inEnhancing Transparency. It was agreed that the health,education and public works sectors would be the focusof the CPAR. The performance of the Local Govern-ment Units (LGUs) was also assessed. Finally, the teamassessed risks arising from the Bank’s involvement.

The Need for Procurement Reform

1.4 From the overall CPAR perspective, the needfor serious procurement reform is urgent. Fromfiscal year 1997 to 2001, annual outlays for procure-ment of goods, works and services by nationalagencies averaged more than Php113 billion. PublicSector Infrastructure Outlays for 2000 and 2001 indi-cate that an average of Php 15 billion of the total bud-

1The “side letter” was first used in 1997 to specify the loan procurement conditions between the GOP and the Bank.

The need for serious procurement reformis urgent. From fiscal year 1997 to 2001,annual outlays for procurement of goods,works and services by national agencies

averaged more than Php113 Billion (Table 2).This excludes procurement by LGUs and

Government Owned and/or ControlledCorporations (GOCCs) placed at around

Php50 Billion a year and for Build OperateTransfer Transfer (BOT) projects withprivate sector participation, estimated

at about Php372 Billion in 2001.

The Bank relies on theRepresentations and assurances

in the “side letter” for enteringinto a Loan Agreement withthe Philippines, and these

representations and assurancesform an integral part of the

Loan Agreement.1

Appendix 5 - CPAR March 2003


Table 1: Status of Recommendations - CPAR 1997

The 1997 CPAR raised important issues and recommendations recognized by the Bank and the GOP as warrantingattention. A situation assessment for each of these issues revealed that, with the exception of the price negotiationpractice of the Procurement Service, all concerns were being addressed. Here is the status summary.

0.3 (a) Cumbersome internal procurement processes. The situation persists and continues to be recognized at high government levels. Executive Order (EO) 40 attempts to clarify some issues to simplify the processes.

0.3 (b) Vacillation of project implementers faced withconflicting Bank and local rules and possible legalconsequences.

0.3 (c) Lack of familiarity of LGUs with Bank procurementguidelines and rationale.

0.5 (a) Through seminars, workshops and appraisal This is continuously being done.missions, the Bank should emphasize the waivers .mandating the use of Bank procedures for NationalCompetitive Bidding (NCB) procurement.

Areas of Concern Status as of February 15, 2002

Somewhat improved with training but much remainsto be done.

Recommendations

0.5 (b) Maritime shipping restrictions. Task Team This is continuously being done.Leaders (TTLs) should discuss at appraisal.

0.5 (c) Discourage pre-qualification, encourage This is now the new norm in the GOP.post-qualification.

0.5 (d) Update the ‘side letter.’ Done.

0.6 (a) Use procurement agents in LGU projects. This is being done.

0.6 (b) Use of Department of Budget and Management’s(DBM) Procurement Service (PS) as the procurementagent in Bank-financed projects—only when the PSagrees that advertisements and invitations will state thatthere will be no price negotiation.

0.6 (b) Use of DBM’s PS Bank should try to convinceDBM to stop the practice of negotiating prices withthe winning bidder.

0.6 (c) Procurement Code. Ongoing.

0.6 (c) Update the procurement rules of Commission In progress.on Audit’s (COA) Government Accounting and AuditManual (GAAM).

This was tried in several projects.Unable to verify if advertisements and invitations indeedstipulated no-negotiation.

Unsuccessful. There is a 30% increase in the numberof agencies using the PS, from 1,200 to 2,186.The practice is true of modes other than public bidding.

This should no longer be an issue for the centralgovernment but is still a problem at the LGU level.


get involved procurement by national agencies, LGUsand government owned and controlled corporations(Table 2). This excludes procurement by LGUs andGovernment Owned and/or Controlled Corporations(GOCCs) placed at around Php 50 Billion a year andfor Build-Operate-Transfer (BOT) projects with pri-vate sector participation, estimated at about Php372Billion in 20012.

1.5 The potential forprocurement reform, andthe budgetary savings real-izable from more transpar-ent and accountableprocurement, is high. Theexperience of textbook anddrugs procurement underWorld Bank-financedprojects demonstrated thatadoption of more transpar-ent procurement processesand InternationalCompetitiveBidding (ICB)practices reduced unitprices of textbooks by about 40 percent—this trans-lated into a savings of about Php1.2 billion for the De-partment of Education. In the case of DOH, unit pricesof TB Drugs were cut by 33 to 94 percent, similarly

translating into a substantial savings. However, the pos-sibility of reforms being blocked by vested interests is amajor concern.

Key Findings of the CPAR

1.6 From the overall findings of the CPAR, thepublic procurement system in the Philippines is dys-

functional. It is character-ized by multiple laws, rulesand regulations whichwhile adhering to the prin-ciples of competition andtransparency, are ineffi-cient and prone to abuse. Italso contributes to lower-ing public funds’ value formoney. The following arethe key reasons why thesystem, despite consider-able efforts in the past,does not function well.l Proliferation of out-

dated and fragmented laws and the multiplicity ofuncoordinated executive issuances. At times theyare inconsistent with one another. They constitutea source of confusion, vacillation in decision mak-

2Presentation by Dr. Edgardo Jose L. Campos Jr., in the PWI Press Briefing, October 5, 2001.3Addressed by the omnibus procurement law signed by President Arroyo on January 10, 2003.

Table 2: Philippines - Magnitude of National Government Procurement Outlays

Source: Tables B.1 and B.14, Budget of Expenditures and Source of Financing, Fys 1999, 2000, 2001, 2002 and 2003

Expense Class 1997 1998 1999 2000 2001

Supplies and Materials 15.750 15.587 17.012 20.295 16.879

Library Books and Materials 0.034 0.158 0.094 0.225 0.071

Other Services 15.096 17.232 15.430 18.676 19.322

Gasoline, Oil and Lubricants 1.883 1.766 2.099 2.593 2.622

Land and Land Improvements Outlay 43.621 68.337 50.406 63.497 59.985

Buildings and Structures Outlay 17.533 12.579 10.175 11.431 6.570

Furniture, Fixtures, Equipment & Books Outlay 11.275 6.307 9.23 5.723 3.642

Information Technology (IT) Equipment Outlay 0.010 0.226 0.799 0.716 0.932

TOTAL 105.202 122.192 105.245 123.156 110.023

From the overall findingsof the CPAR, the public procurement

system in the Philippines is dysfunctional.It is characterized by multiple laws, rules

and regulations, which do however adhereto the principles of competition and

transparency, but it is inefficient, and proneto abuse3. It also contributes to lowering

public funds’ value for money.


ing, slow procurement action, difficulty in enforce-ment and vulnerability to corruption.

l Absence of a single agency with a mandate for: (a)formulating procurement policy, rules and proce-dures, (b) ensuring that these issuances are dissemi-nated to and understood by implementing agencies,(c) monitoring and evaluating compliance, (d) pro-viding tools to attain efficiency,accountability and economy, and (e) increasingcapacity building opportunities, increasing capac-ity building opportunities and a higher level ofprofessionalism in the procurement function.

l Inadequate dissemination and updating of procure-ment rules and regulations. The lack of paralleltraining programs for consistent and efficientimplementation.

l Serious weakness in the capacity of members ofBids and Awards Committees (BACs) as well asthose of Technical Working Groups (TWGs).

l Treatment of Annual Procurement Plans as merecompliance with budgetary requirements. They arenot viewed as tools for efficient implementation,monitoring and evaluation.

l Allowing the practice of negotiation with the low-est calculated or evaluated bidder to meet budget-ary ceiling requirements.

l Serious delays in registration and licensing ofcontractors and suppliers.

l Political interference in the bidding process whenfunding comes from congressional insertionsand countryside development funds (CDF) ofpoliticians.

l Procrastination by bidding committee membersdue to risk averseness when evaluating compli-cated or controversial procurements. This oftenresults in re-bidding as an exit strategy.

l Serious weaknesses in monitoring and enforcingprocurement rules and regulations.

l Insufficient advertisement for small andmedium-sized contracts at the LGU level.

l Surety law does not provide security for contractscallable on demand. Bank guarantees and irrevo-cable letters of credit are prohibitive in cost anddifficult to obtain from commercial banks.

l Allowing unsolicited proposals does not promotetransparency in the privatization process.

l Inadequate mechanism for encouraging legitimatecomplaints and lack of efficient administrativeprocedures for handling them.

1.7 The above key issues mean that despite theGOP’s efforts to streamline the process (as mentionedbelow), waste continues in the use of public resources.More so, the ongoing decentralization of governmentfunctions to LGUs poses an even greater risk.

1.8 The opportunities for procurement reform areenhanced under the new Administration of PresidentGloria Macapagal-Arroyo. Her State of the NationAddress last July 2001 underscored the urgent need forgood governance. Last October, when Congress failedto pass an omnibus procurement law, she showed reso-lution by streamlining procurement via an EO 40. Itconsolidated various rules and regulations on procure-

President Gloria Macapagal-Arroyounderscored the urgent need for

good governance, and streamlinedprocurement through an Executive Order,which consolidated rules and regulations.The President has set as a top priority the

passage of the omnibus law onprocurement, and the CPAR has helped to

identify specific reform measures forstrengthening the legal and policy

framework, strengthening organizationand staffing, improving practices and

processes, and enhancing transparency.


ment. And now that the new Congress is in session,she has submitted as top priority the need to pass theomnibus law on procurement.

1.9 The 2002 CPAR exercise is therefore timely.Backed by the GOP’s strong ownership of the exercise,the CPAR working group identified the following spe-cific reform measures.

Strengthening the Legal and Policy Frameworkl By the end of the year, Congress would have passed

the new procurement law covering allentities of government, including LGUs, withprovisions for sanctions against violators4.

l Sixty days after the approval of the new Procure-ment Law, DBM would have prepared the omni-bus law’s implementing rules and regulations.

l By end of 2003, the COA would have updated theGovernment Accounting and Audit Manual(GAAM) in particular the portion related toprocurement rules and procedures.

l By June 2003, the Construction IndustryAuthority of the Philippines (CIAP) would haveissued a directive allowing foreign contractor to bidwithout a Philippine License. (They will be requiredto secure one prior to award.)

l By middle of next year, DBM would issue adirective replacing surety bonds as a form ofsecurity with Bank guarantees, letters of creditor other forms.

l By middle of 2003, under of the leadership of theNational Economic Development Authority(NEDA), the Build-Operate-and-Transfer (BOT)law and its “unsolicited proposal” rule would havebeen reviewed. A course of action would have beenrecommended to ensure fairness and transparencyin the privatization process.

l By June 2003, the Construction Industry Author-ity of the Philippines (CIAP) and the Departmentof Public Works and Highways (DPWH) wouldhave reviewed the law on arbitration aiming to alignit with international practice.

Strengthening Organization and Staffingl By June 2003, DBM and NEDA would have es-

tablished the Government Procurement PolicyBoard (GPPB) as the procurement oversight en-tity. It would be empowered to: (a) regulate pro-curement processes, (b) formulate policy, rules andregulations, (c) monitor and evaluate complianceby implementing agencies, (d) promote the use ofstate-of-the-art tools to attain efficiency, economyand accountability in the procurement process, and(e) maintain capacity building by improving theprofessionalism of the procurement functionwithin the civil service5.

l By June 2003, DBM will have finished the studyfor spinning off its Procurement Service (PS) intoa separate corporate entity. It will provide efficientservice to agencies for the delivery of commonlyused supplies. It will not compete with the privatesector in the process.

l By the end of 2003, the Civil Service Commis-sion (CSC) in collaboration with DBM and allconcerned agencies, would have finished the studyon how to professionalize the procurementfunction in the civil service, to make the functionindependent of political influences.

l By June 2004, the DBM and the CSC would havedeveloped a sustainable procurement trainingprogram with the cooperation of reputableinstitutes of learning. Attendance will be a require-ment for current and future members of biddingcommittees, TWGs and other staff involved inprocurement.

Improving Practices and Processesl By the end of 2004, to enforce the regulation on

transparency, compliance to mandated processinglead times and the procurement plan, COA wouldhave included review of procurement as an auditstep. An appropriate training program for auditorson procurement audit would have beendeveloped.

4Passed by Congress in December 2002.5The GPPB was established in January 2003.


l By middle of 2003, CIAP, in coordination withNEDA and DPWH, would have finished the studyon registration and licensing of contractors,together with an action plan for implementation.

l By June 2003, as ensured by DBM, the Implement-ing Rules and Regulations (IRR) of the newProcurement Law would prohibit negotiation ofprice and contract amounts for goods and projectsafter bid opening.

l By the end of 2002, the Department of the Inte-rior and Local Government (DILG) and DBMwould have developed a framework and guidelinesfor Congressional insertions and the CountrysideDevelopment Fund (CDF) to prevent the improperuse of these funds6.

l By June 2003, price monitoring will be includedas an important function of the Government Pro-curement Policy Board (GPPB) as assured byDBM.

l By June 2003, the CSC would have finished thestudy on how to provide support to membersof bidding committees and TWGs to preventharassment.

l By December 2003, the Bangko Sentral ngPilipinas (BSP) together with the WB wouldhave reviewed the operations of domestic lettersof credit. This aims to reduce transaction costsand thus promote the use of the instrument toexpedite the payment process.

l By June 2003, the Department of Trade andIndustry (DTI), together with the Philippine Ship-pers’ Bureau (PSB) would have completed thestudy on the financial impact of the Flag VesselLaw. By December 2003, they would have revisedthe policy of waivers for non-Philippine flagvessels for the shipment of goods from Korea andJapan.

Enhancing Transparencyl By June 2003, DBM and the PS would have pushed

for 60% implementation by all agencies of the gov-ernment electronic procurement system.

l By December 2004, the computerized registrywould have been used by all projects, as assuredby the DPWH.

l By June 2003, Procurement Watch International(PWI) would have developed guidelines and train-ing manuals for civil society organizations formonitoring public procurement.

l PWI and Transparency International Philippines(TIP) have on-going programs to encourage andmonitor civil society’s participation inprocurement at all levels.

l The IRR of the new Procurement Law willincorporate a complaint mechanism aimedat encouraging legitimate complaints and an effi-cient procedures for handling them.

Sectoral Case Studies

1.10 The case studies conducted on foursectors, namely, Health, Education, Public Works andLGUs have likewise produced a number of reformmeasures specific to each sector (Table 3). Membersof the working group representing each sector willmonitor the implementation progress. Regular reportsto the working group will be made.

Need for Overall Governance Reforms

1.11 The above-mentioned measures will helpmake the Philippines’ public procurement systemeconomic, efficient, transparent and more predictable.Yet, they will not be enough to completely detercorrupt and collusive practices. The most efficientlydesigned system will be prey to abuse if it is not man-aged by a Government with firm political will. Reformswill therefore be needed in other areas such as publicfinancial management, accounting and internal

6The framework and guidelines for Congressional insertions developed in December 2002.


control, auditing, judicial systems and the civil service.All these are currently the focus of the Government’sefforts to fight corruption.

Ingredients for Successful ReformImplementation

CPAR Working Group1.12 The Government’s firm commitment must besustained. It is thus essential to continue the CPAR

Working Group (WG), possibly transforming it to a“Procurement Technical Support Group (TSG)” untilthe GPPB oversight organization becomes fully opera-tional. This is necessary to ensure that the dialogue forreform implementation continues, and that the moni-toring of agreed actions is carried out. The Bank mustbe able to provide funding and staff support for thecontinuous operation of the Group. In addition, themembers of the Group must be exposed to the experi-ences of other countries that underwent procurement

Table 3: Sectoral Reform Measures

Streamline the policy on textbook content evaluation DepEd Done

Training, empowerment, and professionalism of the bid committee members DOH June 30, 2002

Streamline the procedure for contract review by the Legal Services Division DOH June 30, 2002

Review the staffing of the Procurement and Logistics Service DOH June 30, 2002

Conduct a study on the price of pharmaceuticals DOH Sept. 30, 2002

Revise Section 1-A, Rule IV of the IRR of Republic Act 8047 and General Policy DepEd Dec. 31, 2002No. 5 of the National Book Policy to relax its requirements on the importation ofraw materials for textbooks

Standard estimated cost per classroom, for budgetary purposes, should not be a DepEd Dec. 31, 2002limitation to the resulting bid price

Develop an effective procurement planning and inventory monitoring system at the DepEd Dec. 31, 2002Regional, Division, District and School Levels

Strengthen the Department of Education’s (DepEd) procurement capacity DepEd Dec. 31, 2002

Establish a National Drug Price Monitoring System DOH Dec. 31, 2002

Strengthen the Bureau of Food and Drugs’ capacity to shorten the registration process DOH June 30, 2003

Develop a mechanism to monitor and evaluate the performance of the suppliers, DOH/ June 30, 2003constructors, and consultants DepEd

Review and implement Department of Health (DOH) reforms in terms of DOH Dec. 21, 2003decentralizing procurement

Develop a mechanism to ensure wider participation and competition DPWH Dec. 31, 2003

Streamline the cash allocation and approval process to avoid delay DOH/ Dec. 31, 2003DepEd

Provide/strengthen quality assurance mechanisms for design and supervision DPWH June 30, 2004

Amend the law to allow textbooks of foreign authors to compete for use as DepEd Dec. 31, 2004Science, Math and English textbooks in the Philippines


reform. They can adopt the les-sons learned from those experi-ences. Participation inprocurement reform workshopsand related training exercisesare essential.

Donor Community Assistance1.13 The CPAR identifiedthe technical assistance for theagreed reform measures takinginto consideration the stateddeadlines. In this instance, the donor community mustbe tapped to provide the needed resources to carry outthe reform measures. A meeting with the donor com-munity should be organized by the CPAR WB (or theGPPB Technical Support Group, if already in exist-ence) for this purpose.

1.14 It is worth noting the recent donor interven-tions on procurement such as: (a) Study on Moderniza-tion of Procurement; and (b) the Report on StreamliningProcurement for Project Implementation Efficiencyconducted by NEDA through the funding of ADB.

1.15 Technical assistance through the InstitutionalDevelopment Fund grant of the World Bank has beenaccepted internally in the Bank. It will support thefollowing reform measures:

• Passage of the Omnibus Procurement Law • Preparation of the IRRs• Establishment and operation of the procurement

oversight board • Development of the national training program • Professionalization of the procurement function

in the civil service • Corporatization of the PS

Success Monitoring Indicators1.16 Finally, the CPAR Working Group shall estab-lish appropriate monitoring indicators to measure theprogress, success or failure of the Action Plan, as well

as to identify solutions in caseof difficulties. These indicatorsshall cover the following top-ics: (a) interest of internationalcompetitors measured by thenumber of international biddersin a particular competitiongroup or thresholds; (b) profi-ciency of procurement staff tobe trained annually; (c) numberof rebidding being called; and(d) processing times for the

procurement processes.

Strengthening Procurement and ProjectManagement in Bank-Financed Projects

1.17 The current portfolio of Bank-financed projectsin the Philippines has 25 operations with anet commitment of US$1.4 billion and an undisbursedbalance of US$0.9 billion. The size of the portfolio, interms of number of operations, will likely remain stablein the next three years. Total disbursement in FiscalYear 2001 was US$125 million under investmentprojects, for a ratio of 11.9 percent. This is below theregional standard of 18 percent. The generic implemen-tation issues facing the Philippine portfolio are weakproject and procurement management, slow replenish-ment of funds, limited monitoring capability and un-even capacity of Local Government Units (LGUs) toundertake procurement..

1.18 Since the 1997 Country Portfolio PerformanceReview (CPPR), the Government and the Bank recog-nized that procurement was the major portfolio issue.Measures were instituted to improve procurement, suchas (a) strict enforcement of lead times; (b) close moni-toring of procurement activities by implementing agen-cies with supervision from oversight agencies; and (c)focused training of procurement staff.These measures were seriously implemented, so im-provements followed in the ensuing year. However,

Firm political will is needed to makethe Philippines’ public procurement

system economic, efficient, transparentand more predictable. Complementaryreforms will also be needed in public

financial management, accounting andinternal control, auditing, judicial

systems and the civil service.


1.20 As regards inves-tigating allegations offraud and corruption, theBank will rely on its In-tegrity and InvestigationUnit (INTIU) and applysanctions where calledfor. INTIU visited thePhilippines twice lastyear.

Risk Assessment1.21 The CPAR as-sessed the procurementrisk as average (Attach-ment 1). The Philippines’Public Procurement Sys-tem, through its various

laws, rules and regulations, adheres to the principles ofcompetition, fairness and transparency. However, thereare serious weakness in the implementation of the sys-tem which led to: (a) cumbersome procurement pro-cesses and unnecessary delays; (b) inadequate capacityof implementing agencies; (c) ineffective oversight; (d)high incidence of re-bidding; and (e) lack of account-ability.

1.22 In terms of translating the risk on Bank-financed projects to actual implementation, the CPARproposes the following thresholds:

since 1999, the portfoliobased on disbursementperformance was weaken-ing again.

1.19 The identifiedmeasures to address theweakening portfolio per-formance are:

• Joint portfolio reviews with the ADBand the Japan Bank forInternational Coopera-tion (JBIC)• Regular project re-view and visits by theWorld Bank OfficeManila (WBOM) port-folio team• Close monitoring of the status of implementationand procurement plans in every supervision mission• Conduct of ex-post reviews on a regular basis,preferably jointly with the statement of expendituresreviews• As agreed in the October 2001 meeting with theAssociation of Project Directors (Club of 29), themonitoring of performance through the ProcurementBenchmark and Disbursement Target system(PBDT)7

ICB Works Over $2,000,000 Over $500,000

Goods Over $500,000 Over $200,000

NCB Works Over $200,000 to $2,000,000 Over $50,000 to $500,000Goods Over $100,000 to $500,000 $20,000 to $200,000

Prior Review Works More than $2,000,000 More than $500,000

Goods More than $500,000 More than $200,000

Consultant Services-Firm More than $100,000 More than $100,000

Consultant More than $50,000 More than $50,000Services - Individual

National Not more than $200,000 Not more than $200,000ConsultantShortlisting

Amount of Threshold per Contract for Procurement Methods and Prior Reviews Item Category Infrastructure Sector (per contract) Other Sectors (per contract)

Since the 1997 Country Portfolio PerformanceReview (CPPR), the Government and the Bank

recognized that weaknesses in procurement werea major portfolio issue. Measures were instituted

to improve procurement, such as (a) strictenforcement of lead times; (b) close monitoring

of procurement activities by implementingagencies with supervision from oversight

agencies; and (c) focused training ofprocurement staff. These measures were

seriously implemented, so improvements followedin the ensuing year. However, since 1999, theportfolio based on disbursement performance

was weakening again.

7The PBDT System was replaced by the Procurement/Selection Planning and Monitoring System (PSPMS) in December 2002.



Legal Framework

2.1 The Philippines is a democratic and republi-can state which, under the 1986 Constitution, adoptsthe centralized presidential form. The powers of gov-ernment are exercised by three independent andco-equal branches, namely: the Executive Branchwhich enforces the laws headed by an elected Presidentfor a term of six years; the Legislative Branch whichpromulgates the laws and is vested in a bicameral Con-gress consisting of the Senateand a House of Representa-tives; and the Judicial Branchwhich settles disputes involv-ing rights of contending partiesunder the law, and is vested inthe Supreme Court, an appel-late court, and various otherspecial and lower courts.

2.2 The Philippine legalsystem is basically civil law, with a written Constitu-tion and a body of legislated statutes as the principalsources of law. Common law influence, however, istraceable in some commercial and procedural laws de-rived from American legal institutions. Also, theShari’ah legal system is actually recognized and en-forced in the Philippine Autonomous Region in Mus-lim Mindanao.

2.3 Public Procurement is governed by a separatebody of laws and regulations, consisting of more than40 legislature enactments, Executive Orders (EOs) andadministrative orders (AOs), presidential decrees (PDs)and issuances from government agencies. The primaryresponsibility for the implementation and execution ofprocurement laws and regulations rests with the headsof agencies or offices and the evaluation and awardprocesses are handled by ad hoc Bids and Awards Com-mittees (BACs) in each agency or office. Generally, pro-

curement is viewed from the identification of the itemto be procured up to completion of the works or deliv-ery of goods.

Main Concerns2.4 Public sector procurement is characterized byoutdated and fragmented laws and a proliferationof uncoordinated executive issuances. They prescribe avariety of procurement procedures and requirementswhich at times are not consistent with one another.

Hence, there is an urgent needto review and revise the pro-curement laws and EOs. Newlegislative measures will em-body the best procurementreform ideas suitable to Phil-ippine conditions.

2.5 The multiplicity of EOs,Implementing Rules and Regu-lations (IRRs) and other

agency issuances result in overlapping and uncoordi-nated directives. They create ambiguity and uncertaintyin some procurement procedures (Table 4). It is there-fore important to review the propriety and acceptabil-ity of the proposed rules against standard internationalpractice. As of May 2002, there are three versions ofthe proposed law pending in the Senate and one con-solidated version in the House of Representatives.

2.6 Furthermore, most EOs and IRRs are promul-gated to fill gaps left by the absence of a comprehen-

The Public Procurement Regime

Public Procurement is governedby a separate body of laws and

regulations, consisting of more than40 legislative enactments, Executive Orders

(EOs) and administrative orders (AOs)presidential decrees (PDs) and issuances

from government agencies.1

1Republic Act No. 9184, Government Procurement Reform Act, consolidated all laws into one by January 2003.

Table 4: Partial Inventory Count of ProcurementIssuancesImplementing Rules and Regulations 7Executive Orders 14Memorandum Circulars 3Other Administrative Issuances 17Partial Total 41


sive procurement law. They are normally limited to pro-viding implementing details of an existing law, not tosubstitute it. They do not cite the laws authorizing theirpromulgation, although administrative issuances nor-mally require a legal or statutory basis for their valid-ity. And they do not indicate in their repealing clausesthe specific provisions of previous EOs and IRRs,which are amended, modified, or repealed. This makesthe enforceability of some previously imposed provi-sions uncertain.

2.7 The Commissionon Audit (COA) at timesdisseminates procurementlaws and executive issu-ances for compliance byfield auditors. However, asthe executive issuancesare changed, they are notalways accompanied bycorresponding changes inthe COA rules. Controver-sies arise about which ruleto follow.

2.8 Some martial lawera policies and practices need to be re-examined. Therole of DBM as procurer of commonly-used suppliesfor the entire bureaucracy under Letter Of Instructions(LOI) 755 (1978) and regularized in EO 359 (1989)needs to be subjected to the scrutiny of the regular leg-islative process. The practice of allowing downwardprice negotiation after public bidding and/or after con-tract award should be probed.

Main Recommendations2.9 The main issue is the proliferation of EOs,AOs, and IRRs, which do not supersede each other ordo not repeal the existing/previous rules. The prepara-tion of Executive Order (EO) 40 was a tremendous ef-

fort to consolidate all the documents, but it does nothave the power of law. Therefore, the CPAR team rec-ommends that an omnibus law on public procurementbe passed by Congress and promulgated and executed.It will consolidate, organize and/or cancel the existingdocuments, and give a real legal basis to public pro-curement. The IRRs have to be prepared accordingly.

2.10 Aside from the recommendation for the pas-sage of the new procurement law, it is important to em-phasize the propriety and acceptability of the rules,

taking into considerationi n t e r n a t i o n a lpractice, that are in-cluded in the differentversions of the draftProcurement Bill pend-ing in both houses ofCongress. As majorweaknesses had beenidentified in the draft leg-islation, it is therefore in-cumbent upon theBank, through thisCPAR, to communicateto the Government the

recommended improvements prior to the approval ofthe bill by Congress.

Organizational Framework

Organizational Set-Up2.11 The overall procurement function is vested to:(a) the head of each national agency or instrumentality;(b) the governing board for government owned or con-trolled corporations (GOCC); and (c) the elected headof each LGU. Normally, the size and capacity of theprocurement organization would depend on the volumeof procurement work that each agency must accom-

2The CPAR was completed in June 2002 and contained many joint recommendations by the GOP and the Bank which were included in the new law.

Republic Act No. 9184or the Government Procurement Reform Act

was signed into law by President GloriaMacapagal-Arroyo on January 10, 2003.

The Act is designed to “fight graft and corruption,improve operational efficiency, bolster

transparency in bidding procedures andencourage competition,” said the President

in signing the new law2.


plish. Regulations, such as PD 1594, EO 262, and therecently issued EO 40, mandate the creation in eachagency of bid and selection committees. Some of theirmembers work on an ad hoc basis. These are: (a) theBid and Award Committee (BAC) for procurement ofworks and goods and (b) the Pre-qualification Evalua-tion and Awards Committee (PEAC) for the selectionof consultant services. These committees are assistedby secretariats to handle the administrative function inthe bidding process. EO 40 mandates the creation of apermanent Procurement Secretariat with fixed respon-sibility. This is in the interest of efficiency. The Techni-cal Working Group (TWG) assists the committees inthe technical evaluation of bids. Further, EO 40 pro-vides that the contract approving authority must not beinvolved in the bid evaluation process.

Function and Ad Hoc Staffing2.12 The BAC and PEAC determine the eligibilityof prospective bidders or consultants, receive and openbids or proposals, conduct the evaluation of bids oroffers, undertake pre-qualification and post-qualifica-tion proceedings, and recommend the award of con-tracts. The scope of the BAC and PEAC activitiesspans the pre-procurement conference up to the rec-ommendation of the award. It is chaired by at least athird-ranking official of the agency with at least fourvoting members, namely: the agency’s Legal Officeras Secretary, a technical member, and representativesfrom Finance and from the end-user. Representativesfrom non-governmental organizations (NGOs) and theCOA are required as observers.

2.13 Large agencies like the DepEd have a pool ofofficers from which the Secretary can designate mem-bers of the Committee for each specific procurementpackage. Others, like the DPWH and DOH, designatemembership for one year from among its senior andmiddle managers. Although EO 40 instructed a perma-nent set-up, the BAC and PEAC Secretariat, in mostagencies, are still ad-hoc and their members are desig-nated together with the Committees. The same is truefor the TWG. The ad hoc staffing provides a built-incheck to the system, due to the rotation of member-

ships. However, for organizational control to be effec-tive, the set-up requires a cadre of officials and manag-ers that are qualified to perform procurement functions.In most agencies, proficient procurement staff are lack-ing. Consequently, non-procurement proficient staff areoften designated, and this sometimes derails the pro-cess of decision making. Worse, the proficient staff hesi-tate and sometimes refuse to be designated as membersof the committees. After all, the function is an addedburden to their original jobs, and they are given no in-centives. In the Department of HEalth (DOH), somemembers of the Committee have experienced harass-ment from losing bidders. It is often perceived that thosewho want to become members of these procurementunits have personal hidden agenda.

Professionalize the Procurement Function2.14 The 1997 CPAR had strongly recommendedcapacity building for implementing agencies to carryout their procurement work. In support of thisrecommendation, the Bank utilized resources from theStrategic Compact to conduct a series of training work-shops for procurement staff in all sectors. In 1998, theBank established a self-sustaining training programwith the Asian Institute of Management (AIM),which was selected competitively among institutes ofhigher learning. The curriculum covers procurementmanagement within the larger context of project man-agement. Five courses have been delivered and thetraining is being offered in two regional courses peryear. AIM is now considering the possibility of estab-lishing a graduate degree program with a specializa-tion in procurement management at the masters level.Other lending institutions, such as ADB, JBIC andother bilateral donors, conduct their own training forstaff implementing their projects.

2.15 As mentioned, honest and proficient staffwould not want to remain in procurement for a longtime. Sometimes procurement can be a hazardous job.Training alone is insufficient for a civil servant to pur-sue a career in procurement. It is therefore necessarythat the position and title on procurement be institu-tionalized within the civil service, not only at the na-


tional agencylevel but also at the LGU level. Moreover,the qualification requirement for such career positionsshould be integrated into the educational stream,whether at the college or graduate level. The CPARrecommends that a study be conducted along the objec-tives mentioned. Discussions with the Civil ServiceCommission (CSC) revealed support for such a study.

2.16 The need to build capacity in procurement wasrecognized a long time ago but the determination tobuild sustainable capacity is wanting. Due to fiscalconstraints, the budget for training amounts to NineHundred Pesos (Php900.00) per training course peremployee. This is unrealistic as the regular procure-ment management training course offered by AIMcosts US$2,000.00. Except for the classes of AIM,there is no regular procurement training course thatcaters to the needs of agencies. The technical assistancecomponent in foreign-assisted projects is tapped byagencies to provide the funding for institutionalstrengthening, including procurement training. In theabsence of such funding, however it will be importantto formulate a strategy for sustainable capacity build-ing in procurement, along the lines of professionalizingthe function and establishing a national training pro-gram.

Main Recommendations2.17 The main issue is the absence of a real profes-sion of procurement specialists in the civil service andthe ad hoc nomination of the BAC members. Hence,there is a strong need to ensure that these persons areprocurement certified and independent of political

influences. The CPAR team’s recommendation is to pro-fessionalize the procurement function and establish anational training program to strengthen the capacityof civil servants involved in procurement at thenational and LGU levels.

Oversight and Regulatory Framework

2.18 There is no single central public agencyexclusively tasked with regulating and overseeingprocurement. However, certain agencies and ad hocbodies exist with varying oversight responsibilities.• Procurement Policy Board (PPB)4. This com-

prises the Secretaries of DBM (as chair), Depart-ment of Finance (DOF), Department of Trade andIndustry (DTI), DOH, the Department of NationalDefense, Department of Public Works and High-ways (DPWH) and Department of Education(DepEd), and a representative from the Institute ofCertified Public Accountants. The body promul-gates rules for the operations of the ProcurementService (PS) and other agencies, and conductsevaluations of the centralized system for the pro-curement of goods.

• Committee on Infrastructure of National EconomicDevelopment Authority (NEDA).4 This body moni-tors, among others, the processing time used in thebidding process by government agencies in worksand services contracts. It also promulgates rulesand regulations to amend the existing ones for pro-curement of works and consulting services.

• Disciplinary Committee. This is an inter-agencycommittee created pursuant to AO 129. This isunder the Office of the President, and it imposessanctions for government officials’ non-observance of established deadlines for bidding andawarding of works and consulting services con-tracts. This committee last convened in 1998.

• Philippine Licensing Board for Contractors. ThisGovernment agency issues, suspends and revokescontractors’ licenses.

The CPAR team’srecommendation is to professionalize

the procurement function and establish anational training program to strengthenthe capacity of civil servants involved

in procurement at the national andLGU levels.

4PPB and NEDA Infracom handling procurement were dissolved by the creation of GPPB under RA 9184.


• Construction Industry Arbitration Commission.This body rules on disputes arising from, or con-nected with, contracts entered into by parties in-volved in construction, including those involvingthe government.

• Department of Budget and Management-Pro-curement Service (DBM-PS). This operates agovernment-wide procurement system from whichall National Government Agencies (NGAs), statecolleges, and govern-ment corporations arerequired to procure theircommonly-used sup-plies, materials, andequipment needs. ThePS also monitors theirprices.

• Systems and Proce-dures Bureau of theDBM. This body devel-ops standards ands p e c i f i c a t i o n sfor commonly-usedsupplies, materials andequipment, in coordina-tion with DTI andDOST. It designs an integrated supply man-agement system for government and conducts stud-ies to improve the purchasing system.

Main Recommendations2.19 Given the number of entities involved in theoversight of procurement, the CPAR team recommendsthat an Oversight Entity be established by law to: (i)oversee the procurement function; (ii) ensure qualityand regulate the status and training of the procurementstaff; (iii) maintain a public procurement website to dis-seminate agency procurement requirements and activi-ties; and (iv) monitor prices via an electronic billboardwhich publishes up-to-date market prices of commonly-used commodities. It was agreed that a study on thescope of work of the oversight committee will be con-

ducted to define the detailed functions to be covered. Inaddition, to expedite the operation of the single over-sight entity, the CPAR recommends that the CPARWorking Group, under the DBM, acts in the interim asfacilitator and support group to the current Procure-ment Policy Board (PPB). In the meantime, the CPARWG should define the role, organization and staffing ofthe oversight entity so that it could be involved in thepreparation of the IRRs.

2.20 The CPAR team rec-ognizes the importance andprofessionalism of the Pro-curement Service. To ensureindependence and account-ability, the CPAR recom-mends a study to propose theneeded steps towards the con-version of the PS into an in-dependent and corporatizedentity.

GovernmentProcurementProcesses and

Practices

2.21 In general, laws and administrative issuancesmandate the transparency of procurement proceedings.Competitive public bidding requires the public adver-tisement of requests for bid quotations through generalnewspapers, through the posting of notices in conspicu-ous public places, and lately through governmentwebsites. Thus, invitations to bid are required to be ad-vertised publicly at least twice within two weeks withat least seven days between publications in two news-papers of general circulation. The Official Gazette ispublished weekly and is available to anyone. Public bidopening is undertaken by the BAC, which includesmembership from the private sector and the COA. It isrequired to follow the prescribed procedure for evalu-ating bids. Biddings are conducted via the two-enve-

The CPAR teamrecommends that an Oversight Entity5

be established by law to: (i) oversee theprocurement function; (ii) ensure qualityand regulate the status and training ofthe procurement staff; (iii) maintain a

public procurement website to disseminateagency procurement requirements andactivities; and (iv) monitor prices via an

electronic billboard which publishesup-to-date market prices of commonly-used

commodities.

5Single oversight entity established under RA9184.


lope system, where one contains the eligibility/techni-cal requirements, and the other has the bidding docu-ments. The bid opening is public, and may be attendedby bidders or their representatives.

Main Concernsl Transparency. Even with all the legal documents

in place, it is recognized that the transparency ofpublic procurement is not sufficient. There are stilltoo many influences jeopardizing the procurementprocess. A high rate of re-bidding and price nego-tiations before award often result in this situation.Re-bidding is becoming a natural tool when the re-sult of the bidding is not in line with expectations,or the lowest bidder is not qualified. The strategyfor the first case is evident. For thesecond, political pressures from the disqualifiedbidder intimidate BAC members. Re-biddingsometines becomes an exit strategy.

l Complaint Mechanism. The IRRs of EO 40prescribed an appeal procedure that mandates that“bidders who are not in favor of the BAC’s deci-sion may appeal to the Head of Agency withinseven days from the issuance of such decision.”The complainant has to file a non-refundable feeof Php50,000 for contracts amounting to Php10million and Php100,000 for larger contracts. Therationale for the fee is to discourage irresponsibleprotests from going beyond the agency head. Theprocedure could have the effect of discouraginglegitimate protests.

l Lead Time. Lengthy processes characterizepublic procurement, and bids get to be extendedon a regular basis. AO 129 stipulates a maximumtime per activity and this should be enforced by theheads of agencies and the BACs. It should be moni-tored through procurement audits.

l Procurement Plans. Procurement plans aredeveloped for budget purposes but their implemen-tation is not monitored due to insufficientprocurement staff. Further, there is no specific linkbetween budget formulation, planning of activitiesand procurement execution. Persons in charge of

procurement in the different departments shouldmonitor the procurement process in accordancewith the stated leadtime.

l Registration and Licensing of Contractors. It isa practice to require foreign contractors to be reg-istered and licensed in the Philippines prior to thebidding. The contractor has to embark on a longprocess and establish offices in the country beforegetting the license.

l Negotiation of Contract Price. The review high-lighted price negotiation as one of the key entrypoints for possible corruption. The bidding docu-ments do not allow the reduction of quantities alongpre-agreed percentages. Hence, some parties ne-gotiate with the lowest bidder to stay within theapproved budget. The CPAR group recommendsthe introduction in the new law (orin the IRRs) a proviso to allow departments toreduce quantities of the lowest calculated respon-sive bidder. That will let the departments reducethe contract amount when needed.

l Congressional Initiative and CountrysideDevelopment Fund (CDF). This provisionmay allow more funds to be channeled at the dis-trict level for investments to support the popula-tion. However, the actual procurement practice isnot transparent as some sponsoring congressmanare purported to pre-determine the winning con-tractors. This jeopardizes the credibility of the pro-cess and compromises the integrity of BACmembers.

l Price Monitoring . Some entities such as thePS, COA, DOH and DTI are maintaining a pricelist of commonly used supplies. Price monitoringshould be part of a normal and efficient procure-ment function in each department and office. How-ever, there is a need for an oversight entity tosupervise, monitor and process the prices from alldepartments. In essence, this will result in the moni-toring of public procurement expenses of the Gov-ernment.

l Support to BACs. Members of these committees,who are nominated on an ad hoc basis, do not have


the necessary training required of professional staff.They do not receive the needed support in case ofexternal harassment.

l Bonds, Bank Guarantees, Letter of Credits(LCs). It is common to use surety bonds as bidand performance security. Unfortunately, thesesurety bonds are not really callable on demand andare very difficult to garnish. The practice demon-strates that a surety bond is not an irrevocable guar-antee. Most foreign-assisted projects require bankguarantees or an irrevocable letter of credit as theform of bid and performance securities. However,on the other hand, bank guarantees and irrevocableLCs are not easily accessible to bidders, suppliersand contractors since Banks in the country are ask-ing for the full amount of guaranty to protect them-selves. In this instance, it would be practical tostudy and develop alternative means to make thesystem flexible but ensure that the objectives in im-posing bid and performance securities areattained.

l Goods from Korea and Japan. PD 1466requires that imported goods should be transportedby Philippine vessels. Since Philippine vessels goonly to Japan and Korea, suppliers from these twocountries are at a disadvantage compared to theother countries of the region, which can chooseany vessel available. One can transport goods onanother vessel only if the fare on Philippine ves-sels is more than 10% higher than the rest. Awaiver must be secured from the Philippine Ship-pers’ Bureau (PSB) before a non-Philippinevessel can be used. The CPAR WG finds this rulemonopolistic, expensive and contrary to the rulesof open competition.

l Monopolistic Practices. In general, one of thecommon procurement trends in the Philippines isthe tendency to protect the local market fromoutside competition. That is, competitors aredissuaded by cumbersome administrative pro-cesses: licensing of foreign contractors, mandatorytransport on Philippine vessels, restricted access toforeign textbooks, difficult access to the cheapestdrugs from foreign countries, etc.

l Pre-Shipment Inspection. The Government nolonger engages in automatic pre-shipment inspec-tion. Public and private sector inspectors are left totheir own arrangements. The result is that, in manycases, the pre-shipment inspection isneglected or inspection is done only uponarrival in Philippine ports. This increases the bur-den or risk of the importer. When inspection is doneat the destination port, it increases the cost of rem-edy because goods have to be shipped back to themanufacturer for repair or replacement.

l International Arbitration. According to the Con-struction Industry Association of the Philippines(CIAP) and the Philippine Constructors Accredi-tation Board (PCAB), the Settlement of Disputesprovision, which culminates in an internationalcourt, is not binding. The local party to the con-tract, if he/she so desires, may insist on having thefinal step of the process heard in a Philippine Court.

Main Recommendations

l Enforce the regulation on transparency throughprocurement audits.

l Develop a complaint mechanism, which willencourage legitimate complaints from bidders andpromote transparency in the process.

l Conduct a study on the registration and licensingof contractors. Design and implement an ActionPlan to streamline these processes.

l Enforce processing lead-time through the applica-tion of sanctions and monitor the process throughprocurement audits.

l Strictly implement the procurement plan and de-velop and implement a training program for COAauditors on procurement audit.

l Prohibit the negotiation of price and contractamounts after bids are opened and favor reductionin quantities or introduce alternate solutions in thebidding documents.

l Develop a framework and guidelines for Congres-sional insertions and the CDF. Prepare terms ofreference for a study.


l Include price monitoring as an important functionof the Oversight Board.

l The CSC or the Office of Solicitor General shouldprovide support to members of BACs/PEACssubjected to harassment.

l Discourage all forms of securities that cannot begarnished immediately. On bid security, the Bankcould help in designing “on demand” satisfactorysecurities, which could be issued by non-banking

institutions. An alternative is, in lieu of bidsecurity for small value contracts, establishingpenalties in the new law and its IRRs, such as sus-pensions for bidders who do not sign the contract.For performance securities, the Bank could help indesigning one which could be issued by non-bank-ing institutions.

l Provide the same waiver for goods from Korea andJapan as other countries in the region following thePhilippine Flag Vessel Law.


mittee responsible for bid evaluation. He/she approvesthe contract. The influence of the LCE in thebidding is so far reaching that effectively whoever he/she prefers can win the contract if the LCE decides to

operate in such a way.

3.4 Limited Capacity.Past experiences, in particu-lar for Bank-financedprojects, have shown thatcapacity in most LGUs forprocurement management isvery limited. This is due tothe absence of professionalstaff tasked to perform pro-curement functions. Nor-mally, this is done by theTreasurer or the Secretary

(or worse, clerical staff) in the municipality or prov-ince. In some cases where there are procurement staff,they are not well versed in procurement.

3.5 Non-Implementation of ApprovedProcurement Plans. Procurement plansare prepared by the LGUs to comply with budgetaryrequirements. However, once approved, most LGUs donot make use of the plan as an implementation tool.Sometimes, LGUs do not follow the plan and procuredifferent items.

3.6 National Plans not Conforming to LGUInvestment Plans. In some instances, the LGU’sinvestment plans are not considered in the planning ex-ercises of some national agencies. Hence, the concernedLGUs are unaware of the projects being implementedby the national agencies. Worse, some projects dupli-cate what the LGUs have planned for the same year.This is often true in projects funded by the CDF and the

Overview

3.1 The need for procurement reform at the sub-national or Local GovernmentUnit (LGU) level cannot beoveremphasized. At the core ofdevelopment is the realizationof the objectives of the LocalGovernment Code, decentral-izing, inter alia, the powers forthe LGUs to handle varioussocial, environmental, and in-frastructure development for-merly vested to the nationalagencies. Thus, LGUs’ pro-jected procurement outlays atPhp51Billion in 2002 in-creased by 89% from the pre-vious level in 2001. Moreover, the WB’s portfolio isshifting its focus towards the LGUs, with the numberof projects directly or indirectly involving the LGUscomprising more than 50 percent. As a consequence, asubstantial part of public procurement will be managedat the sub-national level. The CPAR therefore has giventhe appropriate focus on LGU procurement.

Key Findings

Main Concerns3.2 Fragmented Regulation. Procurement rulesare fragmented and there is no specific regulation forthe procurement of public works.

3.3 Lack of Check and Balance. The Local ChiefExecutive (LCE), such as the Mayor orGovernor, is involved as Chairman of the bidding com-

Decentralized Procurement Practicesat the LGU Level

The need for procurement reformat the sub-national or LGU level cannot

be overemphasized. At the core ofdevelopment is the realization of the

objectives of the Local Government Code,decentralizing, inter alia, the powers

for the LGUs to handle various social,environmental, and infrastructure

development formerly vested to thenational agencies.


Congressional insertions in the nationalbudget.

3.7 Delays in Processing Payments to Contrac-tors and Suppliers. As provided in the COA rules,public bidding must be conducted for contracts esti-mated to cost at least Php150,000.00. This amount wasestimated more than 10 years ago and is no longer real-istic. The consequence is that at the same time, moneyand effort is consumed for both large and small pro-curement deals. Also, there are too many steps in thepayment process in most LGUs, so payment is delayedbeyond the 30-day normal span.

3.8 Lack of Systematic Record Keeping.Most LGUs do not have well-ordered procurementfiling systems. One cause of this is the absence of staffmembers who focus on procurement. No one isaccountable to ensure that the files are complete andorganized.

Main Recommendations3.9 By December 2002, LGU procurement willbe adequately covered in the proposed ProcurementBill and its IRRs, as assured by the DILG and theLeague of Cities and Municipalities.1

3.10 By December 2002, the rule that the LCE shallnot chair the BAC will be incorporated in the said lawand its IRRs, as assured by the same bodies.1

3.11 By June 2003, the DBM will issue a circularthat will mandate strict implementation of theAnnual Procurement Plan.

3.12 By June 2003, the DILG will issue a circularenjoining all agencies to consult LGUs during thepreparation of national plans for LGUs.

3.13 By December 2003, the CSC and DILG willfinish the study on professionalizing the procurementfunction and will start the implementation of theresearch. Also, the LGUs will be included in thenational training program for procurement.

3.14 By December 2002, the DBM and the GPPBwill insure that the rationalization of procurementmethods for LGUs are incorporated in the IRR of theprocurement law. Also, by June 2003, COA will havefinished updating the GAAM.

3.15 DPWH or the PPB ensures that all provincesand cities will have effective procurement record keep-ing systems by December 2003. DILG ensures that allmunicipalities will also have the same system byDecember 2004.

1The GPRA covered LGU procurement where Local Chief Executives areprohibited from chairing the Bids and Awards Committee.


Weak Procurement Management

4.1 Since the 1997 CPPR, the Government and theBank recognized that procurement was a major portfo-lio issue. Both agreed on measures to improve projectprocurement such as: (a) strict enforcement of mile-stones and lead times in procurement; (b) close moni-toring of procurement activities by the implementingagencies with supervision from oversight agencies; and(c) focused training of project staff. These measuresgradually resulted in an increase in disbursement forthe years 1997 and 1998. However, since 1999 theportfolio based on disbursement performance weakenedagain. In FY02 (July 2001-June 2002), however grossdisbursement of projects that the World Bank supports

showed marked improvement again and the same paceof improvement is expected for FY03 (Table 5).

4.2 It is revealing that projects with able manage-ment, such as the Social Fund (SZOPAD) and Agrar-ian Reform Communities Development Project were notaffected by the performance downturn. On the other

hand, projects with poor perfor-mance were mostly thoseimplemented by LGUs withvery limited capacity forproject management. It istherefore necessary to takestrong measures to improveportfolio and procurementperformance. The conse-quences of slow procurementare: (i) delays in projectimplementation; (ii) in-creased costs in commitmentfees; and (iii) delays in deliv-ering project benefits to thepoor.

NGAs4.3 Procurement proce-dures in projects financed byinternational institutions fol-low the procedures agreedupon in the loan or grant

Procurement in Externally Financed Projects

It is necessary to takestrong measures to improve portfolioand procurement performance. The

consequences of slow procurement are:(i) delays in project implementation;

(ii) increased costs in commitment fees;and (iii) delays in delivering project

benefits to the poor.

1/

Table 5: Disbursement Ratio

Philippines Disbursement Ratio1/

30%

25%

20%

15%

10%

5%

0%97 98 99 00 01 02 03

Fiscal Year2/

24%

17% 17%15%

12%

17%(Target FY03)

1/ Actual disbursement over funds available at the beginning of the year.2/ Bank’s fiscal year—July 1 to June 30.

21%


agreement. In the case of the WB and the ADB, theloan agreements identify the method to be used for theprocurement of different components of the project. Theguidelines issued by the lending institutions are fol-lowed. To control the process, the lending institutionsprovide no objection or clearances to bid documents orrequests for proposals, evaluations and recommenda-tions for award.

4.4 Procurement remains slow, resulting in a poordisbursement performance ratio of merely 17% in FY2000 and 12% in FY 2001. These were attributed tofactors such as: limited capacity of implementingagencies, poor procurement planning, poor technicalspecifications, or interference from higher officials. Ingeneral, the implementation of projects is slow due tothe “de facto” absence of procurement planning. Dis-bursements could be expedited by grouping the pur-chases, which follow the same rules of procurement.Another key issue is the frequency of re-bidding. Thisis due to the insufficient precision of the documentsdistributed the first time to the bidders.

LGUs4.5 For want of projects, LGUs tend to jump atthe first opportunity to access foreign-assisted projects,notably those of the WB and the ADB. There is a needto fully explain the nature of these projects, the poli-cies, the processes involved and all aspects of the loan,especially financial feasibility. LGUs have to be edu-cated on the intricacies of the project. LGUs that haveexperienced WB’s procedures are generally comfort-able with its prescribed system—clear, comprehensiveand consistent. However, some LCEs feel indisposed tosome WB-assisted projects as the stringent rulesprevent them from making unilateral decisions.

NGOs4.6 NGOs are involved in many WB-financedprojects at different levels: the majority are involved asconsultant firms in implementing one or several con-tracts within a project. Overall project management andparticularly procurement and financial management, isconsidered a weak area for NGOs. Based on this expe-

rience, therefore, the CPAR WG is recommending forfuture projects that: (i) the capacity of NGOs be as-sessed carefully (particularly the past-experience in managing projects, the financial man-agement systems and past audits and the procurementcapacity and capability); and (ii) conflict of interestwithin NGOs networks (between national boards andmembers or leaders of regional NGOs who are part ofthe network) be looked into. The implementationmanual of the project shall clarify responsibilities andimpose rules avoiding conflicts of interests in con-sultancies and decisions of recruitment of host NGOs.

Main Recommendations4.7 During project pre-appraisal, the Procurementmember of the Project Task Team must conductprocurement capacity assessment of implementingagencies to determine actions to be taken to attain goodproject and procurement management, particularlythose involving the LGUs and the NGOs.

4.8 The implementing agency should presentdoable procurement plans and provide the structurefor monitoring, reporting and updating the plans.

4.9 Prior to project appraisal, there should be anagreement as to the procurement organization that willmanage the project and Terms of References for thekey staff in that organization, including the trainingprogram for them.

4.10 The implementing agencies must ensurethat the technical specifications are complete andbiddable to prevent re-bidding. The Operations orImplementation Manual should indicate clearly theresponsibilities and accountabilities for preparingand finalizing the technical specifications for major pro-curements.

4.11 Budgetary allocations, the usage of which arecontrolled by politicians, can be used as counterpartfunds for procurement financed by the Bank whenthe procurement process strictly follows the LoanAgreement.


Measures for Enhancing Transparency

Government Anti-CorruptionInstitutions

5.1 As early as 1930 the Revised Penal Codealready punished a wide spectrum of crimes commit-ted by public officers, including bribery, corruption,dereliction of duty, fraud against the public treasury,misappropriation of public funds, infidelity in thecustody of documents and usurpation of powers. Sub-sequently, various other anti-corruption laws werepassed, notably the Anti-Graft and Corrupt PracticesAct; the Code of Conduct and Ethical Standards forPublic Officials and Employees; the Ombudsman Actof 1989; the Witness Protection Program Law; thePlunder Law; and the latest, the Anti-Money Launder-ing Law. To enforce the foregoing laws there are a hostof government anti-graft bodies:

• Office of the Ombudsman - a constitutional officemandated by law to act on complaints filed againstgovernment officers or employees, and enforce theiradministrative, civil and criminal liability.

• Sandiganbayan - a special anti-graft courtcreated by the Constitution with exclusive jurisdic-tion over violations of the Anti-Graft andCorrupt Practices Act (RA 3019). It also hasjurisdiction over offenses of public officials andemployees connected with their office.

• Civil Service Commission (CSC) - a constitutionaloffice that serves as the central personnel agencyof the government. It is mandated to adopt mea-sures to promote efficiency, integrity, and publicaccountability in the civil service.

• Commission on Audit (COA) - a quasi-judicialconstitutional office mandated to audit the revenuesand expenditures of Government, and to promul-gate audit rules.

• Department of Justice (DOJ) - conducts prelimi-nary investigations on criminal complaints againstpublic officials if they rank lower than Salary Grade

27, and if the offense was committed inconnection with his/her office.

• National Bureau of Investigation (NBI) - an of-fice under the DOJ, conducts fact-finding investi-gations of graft cases and entrapment operations,including those against public officials andemployees.

• Presidential Anti-Graft Commission (PAGC) -created through EO 12 (Series of 2001) to investi-gate administrative complaints against presidentialappointees in the executive department chargedwith graft and corruption.

Notable Anti-Corruption Programs ofGovernment

• Government Electronic Procurement Sys-tem (GEPS) - was established under EO 40 toenhance transparency, accountability, equity, effi-ciency and economy in government procurement.It serves as the single and centralized portal forthe procurement of goods, supplies, materials andrelated services, civil works and consulting ser-vices. Further, EO 40 mandates that all govern-ment agencies and entities should post theiradvertisement in the centralized portal or EPSwebsite. Likewise, the winning bid should also beposted. (Table 6).

• Inter-Agency Coordinating Council - avoluntary alliance of government agencies man-dated by the Constitution and laws to promote andmaintain accountability, integrity and efficiency inpublic service. It is composed of the Office of theOmbudsman, CSC, COA, DOJ, NBI and the Presi-dential Commission Against Graft and Corruption(now known as the National Anti-Corruption Com-mission). The objective of the Council is to fostercloser cooperation, share information, and pool re-


Table 6

Source: DBM Case Study on the EPS

The Philippines Government Electronic Procurement System

1. On November 22, 2000 the Procurement Serviceof the DBM, with help from CIDA, launched aninternet-based pilot electronic procurement system (EPS)composed of a Public Tender Board, Electronic Catalog,and Supplier Registry. The system improved access togovernment opportunities, saved cost, and enhanced theefficiency and transparency of government procurement.

2. The DBM oversees government expenditures throughthe release of budgetary allotments for different govern-ment agencies and departments, while its ProcurementService (PS) handles the purchase of goods and servicesfor over 1,800 client agencies and monitors prices ofgoods and services. Transparency in governmentprocurement is a systemic problem in the Philippines, andadded to this are inefficiency, poor service delivery andlow sales volumes resulting from manual and paper-drivenprocurement processes. A 1999 study conducted by thePS with CIDA assistance showed that a pilot EPS couldimprove transparency, efficiency and value for money ingovernment procurement.

3. The system went live on December 1, 2000, andis now being marketed by the DBM to other agencies. TheEPS advertises bids electronically. Bids are received inhard copy and evaluated by hand. The evaluation andaward results are then posted electronically.

4. The EPS is supported by several EOs and AOs.EO 40 of October 2001 and Republic Act No. 8792,dated June 14, 2000, recognize and encourage the useof electronic commerce in general and of electronicprocurement in particular. Section 27 of the E-CommerceLaw (R.A. 8792) also mandates that by mid-2002,Agencies/GOCC/GFIs shall “transact governmentbusiness and/or perform governmental functions usingelectronic data messages or electronic documents...”,leaving room for the selective application of electronicprocurement, depending upon the degree of sophisticationof the existing systems, as well as their applicability tospecific types of procurement and specific procurementprocesses. The implementing rules and regulations of EO262 state that “bid requirements should be placed in twoconsecutive issues of two newspapers of generalcirculation and posted in the EPS and the website ofthe concerned agency.” The previous practice wasto advertise the bids in three major newspapers—advertising on the EPS has saved the government

money in advertising costs. The total cost of the EPSpilot program has been estimated at about US$400,000,shared equally between DBM and CIDA. Within six monthsafter going live, the EPS had 86 agencies and 62 suppliersregistered, and 71 bid notices posted on the EPS. (As ofOctober 10, 2002, there are 1,797 agencies, 2,377suppliers registered and 9,214 bid notices posted).Eventually all government procurement notices areenvisaged to be posted on the EPS. Suppliers are ableto access government bid opportunities 24 hours a day7 days a week.

5. While the system has great potential for improvingthe transparency and efficiency of procurement, the GOPhad noted the implementation challenges early and istaking steps to address them. For example, even with highinterest and support for the EPS, its initial implementationwas relatively slow. The reasons were numerous—agencies did not have the same resources or capacity forsupporting the EPS, only about 25 percent of agenciestrained in the EPS were ready for internet access, onlyabout 8 percent of Filipinos were using the internet in 1999,there was resistance to change from employees whothought the EPS would lead to a loss of jobs, and this wasalso a time of larger political uncertainty and turbulence inthe Philippines (the pilot testing ran into the presidentialimpeachment trial, the EDSA II people power revolution,and the assumption of office by a new government).Second, a key lesson learnt has been that the technologybeing used must consider the users’ level of knowledgeand skill, access to the necessary infrastructure/equipmentand services, and needs and expectations. Third,leadership has to come from the highest levels of thegovernment, and be sustained. Fourth, the agencies usingthe EPS must have intimate knowledge of their targetmarket and know how to segment it—each segment willrequire a different marketing strategy and will have differentservice level expectations. Customers will start using a newsystem continuously only if it adds and continues to addvalue through its content and quality of information, and ifthe system and its support services meet or exceed theirservice level expectations. Third, in order that technicaland logistical support can be provided on a timely basis,implementation and maintenance of the electronicprocurement service is being bid out to the private sector.


sources for the more effective prevention, investi-gation, and prosecution of venalities ingovernment.

• National Anti-Corruption Plan - an ambitiousanti-corruption program proposed by the Develop-ment Academy of the Philippines; theGovernment’s executive training center. Its visionis a clean government and a corruption-intolerantsociety. To attain this, the plan seeks to streamlinegovernment transactions; enforce anti-corruptionpolicies and laws; promote integrity in the civil ser-vice; mobilize citizensagainst corruption and de-tect and prosecute corruptofficials and employees.

• Government PurchasesInformation System - aCOA-initiated electronicprice monitoring in forma-tion system to assist govern-ment agencies in identifyingsuppliers offering the bestmarket price of commonlybought goods. With the use of computers, the sys-tem collects prices of goods purchased by memberagencies that undertook actual public biddings. Itthen transmits these data to the Government Pro-curement Information System (GPIS) Center.

World Bank

5.2 The Bank is active in looking into procurementperformance and transparency in the Philippines. Aspart of its fiduciary responsibility, the Bank has em-barked on a systematic expost-review exercise to haveall of the 25 ongoing projects reviewed at least onceduring the fiscal year. An external audit of procure-ment in Bank-financed projects is scheduled for FY03.At the central level, the Department of Institutional In-tegrity (INT) was created with a mandate to investigateany allegations of fraud and corruption reported to the

Bank. A hotline (10511-1-800-831-043) with multi-lingual capabilities is available to the public all overthe world. Hotline users can choose to remain anony-mous. Cases that require further investigation are sentto the appropriate unit for investigation.

Civil Society

5.3 The Philippines has been prominent in involv-ing civil society in the public procurement process to

enhance accountability and trans-parency. This has happened atboth national and local levels.

5.4 Procurement Watch, In-corporated (PWI) is a non-profit,non-partisan, civil society orga-nization (CSO) created by agroup of concerned individualsfrom government, academe, thelegal profession and the privatesector, brought together by the

challenge of reducing graft and corruption in govern-ment procurement through research, partnerships, train-ing, and advocacy. Established on February 15, 2001with support from the ASEM Trust Fund managed bythe World Bank, PWI promotes transparency and ac-countability and assists in streamlining procedures ingovernment procurement of goods, supplies, materials,services and infrastructure projects.

5.5 Active procurement monitoring, public fora,roundtable discussions, workshops, technical assistanceto government, research, publications andmedia releases comprise some of PWI’s activities. Byexposing inefficiencies in public procurement policiesand procedures, and presenting alternatives based onwell-grounded research, PWI believes it can push forreforms that enhance competitive public bidding andlessen the possibility of corruption.

The Philippines hasbeen prominent in involving

civil society in the publicprocurement process to enhanceaccountability and transparency.

This has happened at both nationaland local levels.


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