ra9184 gppb presentation

Reviewing RA9184 Alain Pinsotes

Public Procurement Process• Competitive public bidding for government procurement began a century ago when the United States Philippine Commission introduced it

• The procurement process was overhauled on October 8, 2001 when President arroyo issued EO 40 which consolidated procurement rules and procedures for all national government agencies

• 2 years later, RA9184 came to be

Brief Background• Mandates measures for transparency, accountability, harmonization, and efficiency

• Seeks to combat corruption in public procurement • Bill stresses that ICT should play a central role in how the government meets these goals.

• Invites the involvement of civil society through an e-procurement portal, PhilGEPS, and by opening proceedings to outside observers

• Values and practices are promised, but not realized

Struggles in Procurement• Vincent Lazatin, the executive of the Transparency and Accountability Network (TAN), offers a summary of procurement here in the Philippines:

“The Philippines is cited very often for having a world-class type of legal framework for procurement, but where we fail most of the time is in actual compliance and implementation. So here we are 10 years into the law and we are still having huge implementation problems.”

Struggles in Procurement• Attorney Rachelle Padre-isip wrote an article about the public procurement process here in the Philippines entitled: “Good law, poor reality”

• Hermogenes Ebdane, former secretary of DPWH has this to say about forms of corruption in procurement: “collusion is part of the way contractors do business but it does not mean that public works officials are involved in it”, he also says DPWH officials “cannot prevent contractors from talking among themselves”

Struggles in Procurement• Former COA commissioner Sofronio B. Ursal believes corruption in public procurement “goes well beyond the actual bidding process”,

• Along with secret agreements among bidders to stifle competition, the process is undermined by things such as the falsification of documents, ghost deliveries, bribery, premature opening of bids, nepotism/favoritism, delaying without justifiable cause, and many other forms of dishonesty

Struggles in Procurement• Using terms like “cannot prevent” or “goes beyond this and that” It seems as though a good number of public officials have accepted human corruption as a reality that cannot be eradicated

• But it simply means that as long as corrupt individuals have opportunities to subvert the process, the law will always have opportunities to improve

• Experimenting with new ideas can pave the way for improvement.

A Comprehensive Procurement Framework• “Curbing Corruption in Public Procurement in Asia and the Pacific” published by ADB and OECD gives an overview of the procurement systems in 25 Asian countries.

• Korea’s procurement framework is the most comprehensive, and is considered one of the most efficient (but not immune to corruption).

A Comprehensive Procurement Framework• The recommendations I am presenting are drawn from more than 10 countries, with South Korea in the center.

The Procurement Framework of South Korea• There are 8 salient features in the procurement system of South Korea that I will touch, add on, and draw from:

• 1. There is a single agency for military procurement, the Defense Acquisition Program Administration (DAPA). They require the use of Defence Integrity Pacts for all military contracts made.


• 2. A code of conduct is implemented in all levels of staff and management to instill integrity among all workers and corporations.


• 3. Korea rotates its public procurement agents every two years to prevent the establishment of relationships that could lead to favoritism.


• 4. All negotiated contracts are made known to audit institutions. Regular annual audits are mandatory.


• 5. All suppliers who want to participate in bids are required to obtain a certificate before completing their registration one day prior to bid opening.


• 6. Korea’s protest/grievance mechanisms allows bidders and suppliers to file complaints to the Public Procurement Service, the Korea Independent Commission against Corruption, or the ombudsman.


• 7. Sanctions and penal clauses are very strict and comprehensive, touching on the top of the hierarchy all the way to the bottom.


• 8. Procurement agency personnel are obligated to disclose attempts at corruption. Their legal framework makes legal persons responsible for foreign bribery


• 9. In some cases, Korea uniquely applies a “multiple-award method” to give procuring entities more options on how to enter contracts with qualified suppliers of similar goods.

I. National Defense Procurement• R.A. 9184 is tailored fit for DPWH and DOTC• Government purchases in the armed forces require special attention technicality-wise and confidentiality-wise.

• Again, Korea has a specific defense agency in charge of conducting national defense procurement.

• In Bangladesh and Mongolia, the government can decide not to apply procurement rules and regulations in the interest of national defense and security

I. National Defense Procurement- India uses integrity pacts for all military transactions made

- Security-sensitive purchases in Singapore are exempt from the application of regulations

- Turkey has a law that exempts the military from making public its goals and targets

- Canada keeps its military spending and procurement a secret

- Argentina includes the participation of civil society in developing defense plans

- In Colombia, military procurement information is made available to the public except technical specifications.

I. National Defense Procurement- The Philippines should have specific provisions on security information.

- This provision can aid the DND in practicing more confidentiality in their military transactions

*The DND BAC has too much power over end users. There has been several cases where the DND procurement entity interferes or dictates the AFP on what technical specifications should be.

National Defense Procurement: Recommendations• A new “National Defense Procurement” Article can be inserted in RA9184, with the following provisions:

• A) Transparency is the default principle for all military procurement, but confidentiality is a possibility only if relevant and necessary.


• B) To ensure sensitive information is protected, the government can decide not to apply procurement regulations in the interest of national defense and security.


• C) Integrity pacts and anti-corruption agreements must be used for all contracts made. A confidentiality affidavit must be signed by both the procuring entity and the bidder.


• D) All military procurement information is made available to the public except for technical specifications.


• E) AFP’s decisions on projects and purchases should not be dictated by the DND.


• F) The AFP BAC can invite members from the academe to become members in making decisions in this area, particularly scholars of national security.


• G) A defense committee can be created by the AFP, with roles similar to Korea’s Defense Acquisition Program Administration (DAPA).

II. Codes of Conduct• A system of Codes of Conduct is a common integrity practice in several countries, including here in the Philippines

• They’re a means not only to safeguard integrity but also to enforce it.

II. Codes of Conduct• Cambodia’s codes of conduct contain rules that emphasize staff respect, honesty and proper management of conflict interests

• The winning bidder in Cambodia even has to explicitly declare that not bribes have been paid to procurement personnel or any competing bidder

II. Codes of Conduct• In Japan and Kazakhstan, both national and local government officials are subject to a code of ethical conduct

• Again, Korea has a mechanism for monitoring compliance with the code of conduct, and impose sanctions if it is ever violated

• Some country’s codes of conduct require integrity pacts to be included for every agreement made

II. Codes of Conduct• Integrity pacts are a tool for preventing corruption in public contracting.

• They are essentially an agreement between the government agency offering a contract and the companies bidding for it that they will abstain from bribery, collusion, and other corrupt practices for the extent of the contract.

• Benefits: save taxpayer funds, avenues for illicit gain are staved off, provide enhanced access to information, increase trust and confidence, and encourage participation

II. Codes of Conduct• South Korea also requires private enterprises to establish codes of conduct

• Adopting a code of conduct for private enterprises here in the Philippines can shed light on the obligations of workers to enforce conduct and fairness.

II. Codes of Conduct• Toyo-Korea Code of Conduct• Code of conduct of Toyo-Korea provides principles of practical business operation, and explains

what is to be considered with priority when carrying out business activities and ethical values for directors and officers, employees and subcontract personnel.

• Comply with laws and regulation of the countries of business operation and with internal corporate rules, with the highest standards of honesty, integrity and fairness.

• Respect humanity of the people in the world, free from discrimination and harassment.• Comply with international arrangements governing global business operations.• Comply with international treaties and laws and regulations for environmental conversation and

protection, and place the highest priority on health, safety, security and environment.• Respect intellectual properties, patented or otherwise, of customers, partners, and others and

protect those of Toyo-Korea.• Do not commit unfair business transactions such as insider trading of stocks, in compliance with

laws and regulations of the countries of business operation.• Keep accurate, complete and timely financial and accounting records, in compliance with laws and

regulations of the countries of business operation.• Do not stand against the overall interests of Toyo-Korea, and with the highest standards of ethics

draw a line between public and private.• Comply with laws and regulations of the countries of business operation in dealing with customers,

partners and stakeholders, and observe the highest standards of ethics in conducting business anywhere in the world.

• Oppose resolutely any antisocial influences and do not submit to their demands.• Report immediately and in good faith to Administration Division Manager of any known or

suspected violation of this Code of Conduct.

Codes of Conduct: Recommendations• Requiring the Philippines to create a Code of Conduct in procurement procedures will be a significant step in fostering integrity. It can be a complement to the “no contact” clause between the bidder and the BAC in the beginning of bidding procedures:

• A) Private enterprises should be required to establish codes of conduct of their own.


• B)The code should require winning bidders to explicitly declare (in speech and in writing) honesty in their proceedings.


• C)The code should compel procurement and BAC personnel to attend integrity issues and seminars, facilitated by the academe.


• D) To ensure that all personnel adhere to the code of conduct, penal clauses and sanctions can be added following repeated violations of codes.

III. Staff Rotation and the BAC Composition• Staff rotation here in the Philippines happens every 3 years; it should be done more often and it should not be within the same agency.

• The composition of the BAC in RA9184 is composed of chairman, two officers, technical experts, and corresponding representatives.

• The BAC can be reconstructed to prevent this from happening.

III. Staff Rotation and the BAC Composition• A possibility is making technical experts anonymous, reviewing bids on their own without group influence and institutional inertia, legally part of the BAC but physically outside of the BAC circle

• Adding regular members from the academe along with technical experts is also a risk worth taking.

• Another possibility is the inclusion of well-known firms to the committee.

III. Staff Rotation and the BAC Composition• The Philippine procurement system also tasks “observers” to watch the stages of the procurement process, composed of individuals from a “duly recognized private group”.

• Observers should not be invited by the BAC chairman and junior officers, but by a third party to ensure objective screening

Staff Rotation and the BAC Composition: Recommendations• A) Staff rotation for the BAC and procuring entities should be done more often, possibly yearly

• B) Technical experts, members from the academe, and well-known firms can possibly be made into regular members of the BAC, not just provisional members.

• C) Observers of the procurement process should be invited by another entity apart from the chairman and junior officers of the BAC

IV. Auditing Authorities• Auditing increases the possibility of detecting corruption and decreases the spread of it.

• COA has already been given the authority to conduct internal and external audits of which every procurement entity must comply with

• The Philippines can have its top 30 audit firms (SGV, KPMG, PUNONG BAY, etc.) be empowered and obliged to audit procurement transactions.

IV. Auditing Authorities• Procurement seminars are also a means for the government to do its yearly inspection

• In Japan, the government holds yearly seminars to discuss upcoming procurement.

• Yearly government seminars can greatly aid procurement planning and give all procuring entities more confidence in their purchases

Auditing Authorities: Recommendations• A) The procurement process should not only be audited by COA, but by audit firms as well. They can be funded with a small amount from the budget of the project.

• B) The Government of the Philippines (GOP) should hold yearly procurement seminars. This is to inspect its procurement processes and discuss all upcoming procurement.

V. Bid Opening• A way for bid openings to be fair, based on the suggestions of experienced bidders, is for bid-opening proceedings to be video and audio recorded.

• All bidding documents from different bidders should be shown on the big screen, since it is an open bidding after all

• Bidders should be allowed to record the proceedings themselves and be entitled to use it as evidence when corruption occurs.

Bid Opening: Recommendations• A) Bid opening proceedings should be video and audio recorded. These recordings should be made publicly available. If this cannot be done, the bidders themselves should be allowed to record on their own, and entitled to use it as evidence.

• B) During the bid opening, there should be a big screen (camera pointed to the bid documents table) in which everyone in the room knows what is being done to the documents.

VI. Protest/Grievance Mechanisms and Civil Society’s Right to Information• Complaints are only directed to the procuring entity itself, and appeals to a higher level of jurisdiction are only seen as a last resort

• This can be problematic if the head of the procuring entity himself/herself is hiding a corrupt act and if the protest is against the head himself/herself

• This discourages bidders to report cases of corruption.

VI. Protest/Grievance Mechanisms and Civil Society’s Right to Information• In Bangladesh, Kazakhstan, Japan, and Hong Kong, review of complaints is given to independent review boards (comprising of members from the legal profession and even civil society)

• The jurisdiction of protests here in the Philippines can be given to independent review panels comprised of members from the legal profession, regional court authorities, an ombudsman, or any third party.

VI. Protest/Grievance Mechanisms and Civil Society’s Right to Information• Civil society can be given an avenue to complain against procuring agencies here in the Philippines.

• In Indonesia, decisions on complaints are published publicly so any citizen can request for procurement information and file a complaint against an agency. Any aggrieved citizen can be an oversight tool.

• India and Thailand also empower individuals who are not involved in procurement to bring allegations of corruption to the attention of specialized audit or anti-corruption bodies

VI. Protest/Grievance Mechanisms and Civil Society’s Right to Information• To complement the involvement of civil society, court action should be made available not just as a last resort.

• Bidders will benefit from an immediate legal channel where they can file complaints directly to a legal entity. This equals the playing ground and ensures justice and fair play.

Protest/Grievance Mechanisms and Civil Society’s Right to Information: Recommendations• A) Jurisdiction of protests can be given to independent review panels instead of the head of the procuring entity or the BAC

• B) Final decision should also lie in these said panels instead of the head of the procuring entity

• C) Civil society should be given an avenue where they can also complain.

Protest/Grievance Mechanisms and Civil Society’s Right to Information: Recommendations• D) Court action should be made available not just as a last resort. A direct legal channel can allow aggrieved bidders to pursue justice objectively.

VII. Sanctions and Penal Clauses• The only recommendations here are to put, public officials, private individuals, BAC personnel, heads of BAC, into account – establishing punishments for these parties if they perform bribery (or receive gifts and advantages), favoritism, nepotism, delaying of bids, manipulating eligibility requirements, and any attempts to undermine procurement regulations.

VIII. Obliging Legal Persons and Procurement Personnel• The legal framework of Korea that holds legal persons responsible for foreign bribery is a new idea not practiced by a lot of countries.

• If applied in the Philippine context, it will largely necessitate legal persons to actively ensure the containment of corruption. If not, then they will face consequences along with the bribers themselves.

• This entails a whole new discussion beyond the scope of this research.

Obliging Legal Persons and Procurement Personnel: Recommendations• A) Legal persons and procurement personnel can be held partially responsible for both domestic and foreign bribery. This will oblige them to report such cases

• B) They can be penalized if a case of bribery is proven and they failed to report it, and offered a reward if they are able to report it with evidence.

Conclusion• From the different processes of national defense procurement, staff rotation, auditing authorities, to legal frameworks, bid opening procedures, and grievance mechanisms, the procurement framework of Korea and several more Asian countries present a great deal of possibilities for our country’s own procurement laws.

Citations• Citations• Campos, J., & Syquia, J. (2005). Managing the politics of reform overhauling the legal infrastructure of public procurement in the Philippines . Washington, DC: World Bank.• • Curbing corruption in public procurement in Asia and the Pacific: Progress and challenges in 25 countries : Thematic review. (2006). Mandaluyong City, Metro Manila, Philippines: Asian

Development Bank• • Defense Industry Daily. South Korea's 2015 Defense Budget up 4.9%. Retrieved Jule 2015, from http://www.defenseindustrydaily.com/rok-2015-military-spending-028895/• • Defence Procurement. (n.d.). Retrieved June 2015, from http://www.mindef.gov.sg/imindef/key_topics/defence_procurement.html• • Directive 2009/81/EC. (n.d.). Retrieved June 2015, from http://ec.europa.eu/internal_market/publicprocurement/docs/defence/faqs_28-08-09_en.pdf• • Freeman, S., & Solmirano, C. (n.d.). Why arms procurement goes wrong. Retrieved July 1, 2015, from http://www.sipri.org/research/armaments/milex/publications/unpubl_milex/

unpubl_milex_default/procurement• • Kim, Seok. Korean Defense Procurement from Foreign Countries and International Cooperation Plan, International Public Procurement Conference. Retrieved July

2015, from http://www.ippa.org/IPPC4/Proceedings/03DefenseProcurement/Paper3-2.pdf• • Korean Government Procurement Reform Act• • Korean Investment Corporation. Ethics Management, Codes of Ethics & Code of Conduct. Retrieved July 2015, from http://www.kic.go.kr/en/in/in060100.jsp• • Philippines Government Procurement Reform Act• • Steinberg, G. (n.d.). Accountability and Confidentiality in Israeli Military Procurement. Retrieved June 2015, from http://www.isr.umich.edu/cps/pewpa/archive/archive_98/19980010.pdf• • Singapore Government Procurement Act• • Taiwan National Security and Defense Law and Regulations Handbook. (2007). Intl Business Pubns USA.• • United Nations Convention Against Corruption (UNCAC). Thematic compilation of relevant information submitted by the Republic of Korea. Retrieved July 2015, from

https://www.unodc.org/documents/corruption/WG-Prevention/Art_8_Codes_of_conduct/Republic_of_Korea.pdf• • Toyo Engineering Korea Ltd. Code of Conduct. Retrieved July 2015, from http://www.toyo-eng.com/kr/en/company/ethical/e_rule

• http://sunlightfoundation.com/blog/2013/10/07/case-study-public-procurement-in-the-philippines/• http://peranatinito.net/index.php?option=com_content&view=article&id=63:the-public-procurement-process-good-law-poor-reality&catid=51:procurement-watch&Itemid=76

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