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.”

• 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”

• 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

• 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.

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

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

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

Korea
• 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.

Korea
• 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.

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

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

Korea
• 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.

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

Recommendations
provisions:
• 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.

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

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

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

Recommendations
provisions:
• 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.

• 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

• 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

• 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

• 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.

• 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.

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

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

Codes of Conduct:
Recommendations
• 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.

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.

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.

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.

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

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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