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Ombudsman indicts Abaya, 16 others over P4.2 billion MRT maintenance contract

The Office of the Ombudsman indicted former Department of Transportation (DoTr) secretary Joseph Emilio Abaya and 16 others over a P4.2billion contract with several private companies for a three-year maintenance service of the problematic Metro Rail Transit 3 (MRT3).

Ombudsman Conchita Carpio Morales found probable cause to charge Abaya and the other respondents for violation of Section 3(e) of the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019) over the anomalous MRT3 maintenance contract.

Abaya was transportation secretary under the Benigno Aquino administration.

Also facing charges are DoTr Undersecretaries Edwin Lopez,  Negotiating Team head Rene Limcaoco and his deputy Catherine Jennifer Francis Gonzales; MRT3 General Manager Roman Buenafe, Assistant Secretary for Procurement Camille Alcaraz, MRT3 Bids and Awards Committee Vice-Chairperson Ofelia Astrera, Attorney Charissa Eloisa Julia Opulencia, Engineering Division chief Oscar Bongon, Engineer Jose Rodante Sabayle.

Private respondents Eldonn Ferdinand Uy of Edison Development and Construction, Elizabeth Velasco of Tramat Mercantile Incorporated, Belinda Tan of TMI Corporation, Inc., Brian Velasco of Castan Corporation, and  Antonio Borromeo, Jun Ho Hwang and Elpidio Uy from Busan Universal Rail, Inc. (BURI) were also included in the indictment.

Rigged for a single provider

The Office of the Ombudsman’s Special Panel of Investigators found that in October 2014 and January 2015, the DOTr conducted two biddings for the three-year maintenance service contract for the MRT3.

Both biddings failed due to non-submission of bids.

On 28 January 2015, Abaya issued a Special Order creating the MRT3 Bids and Awards Committee (BAC) for the procurement of goods, infrastructure projects and consulting services of the MRT3 system, the Ombudsman said.

On March 2015, the MRT3 BAC issued Resolution No. 002 recommending it resort to Negotiated Procurement through Emergency Cases under Section 53.2 of the Revised Implementing Rules and Regulations (RIRR) of the Government Procurement Reform Act (Republic Act No. 9184).

Documents, however, show that the contract was set to be awarded to a single maintenance service provider that would establish a Single Point Responsibility for several services, the Ombudsman said.

Table by the Office of the Ombudsman

On 21 December 2015, the MRT3 BAC issued Resolution No. 14 Series of 2015 recommending that the project be awarded to Busan JV.

On 07 January 2016, the DOTr, the MRT3 and the Busan JV entered into a contract for the long-term maintenance contract.

‘Incapable of undertaking maintenance project’

In its Consolidated Annual Audit Report (CAAR) for 2016, however, the Commission on Audit (COA) observed that the “DOTr still failed to provide the riding public with a safe and comfortable transport system even with the procurement and delivery from August 2015 to January 2017 of 48 new LRVs with a total cost of P3,759,382,400.00.”

“Despite four years in the procurement process and total payments of P527,761,083.00 (equivalent to 14 percent of the contract price) to Dalian, the LRVs remain inoperational and unaccepted by the DOTr as of reporting date  due to glitches in the power supply and signaling system.  These resulted from the DOTr’s poor planning and other major procurement lapses,” the COA added.

The Special Panel of Investigators found that respondents extended unwarranted benefits, advantage and preference to the contractor when it awarded the project to Busan JV, an ineligible and unqualified entity, the Ombudsman said.

“In sum, the Busan JV was not technically, legally and financially capable to undertake the MRT3 long-term maintenance contract.  Despite its being unqualified, the contract was still awarded to it by the DOTr, in violation of Section 53 of the RIRR of R.A. No. 9184, which requires that in negotiated procurement, the procuring entity should negotiate with a technically, legally and financially capable supplier, contractor or consultant,” the Ombudsman said.

The panel said then Secretary Abaya has immediate and primary responsibility for all government funds and property pertaining to his agency at the time of the questioned transaction.

Welcome decision

Bagong Alyansang Makabayan (Bayan) secretary general Renato Reyes Jr. who led the filing of the complaint against Abaya last November welcomed the Ombudsman’s decision

“These maintenance contracts involving what we alleged are unqualified providers were partly to blame for the sorry state of the MRT3,” Reyes said.

“We are still a long way from achieving justice for commuters and taxpayers but we hope that the case will lead to genuine accountability,” he added.

Reyes advised the Rodrigo Duterte government to likewise examine the policy of privatizing the train system, its functions and maintenance.

“This has been routinely abused by both government officials and private groups to the detriment of the commuters and taxpayers,” Reyes said. # (Raymund B. Villanueva)

 

Unsolicited projects for favored business interests to rise under Pres. Duterte?

By Arnold Padilla / IBON Features

When President Duterte said last month that “all projects of the Philippines would be something like a Swiss Challenge”, media attention has focused on the Swiss Challenge and its implications. But what the presidential statement implied was that in order to supposedly fast track his ambitious Build Build Build program, the administration may encourage more unsolicited proposals and negotiated contracts.

And there lies the real and bigger problem. Unsolicited proposals and negotiated contracts are the worst form of public procurement of infrastructure under the public-private partnership (PPP) scheme. These negotiated deals are the most prone to bureaucratic corruption and to patronage for favored business interests.

Close ties

San Miguel Corporation (SMC) president Ramon Ang, for instance, is among the closest to Malacañang. He is publicly known as one of the (unofficial) major campaign contributors of Pres. Duterte and patron of the Chief Executive’s controversial anti-drug campaign. SMC, a Php255-billion diversified conglomerate and known to cultivate close ties with whoever is in power, is currently implementing theunsolicited Php62.7-billion MRT-7 while awaiting government approval of two more unsolicited mega infrastructure projects.

Based on the revised (2012) Implementing Rules and Regulations (IRR) of the Build-Operate-Transfer (BOT) Law, unsolicited proposals are “project proposals submitted by the private sector, not in response to a formal solicitation or request issued by an Agency/LGU (local government unit) and not part of the list of priority projects as identified by Agency/LGU, to undertake Infrastructure or Development projects.”

A third party could challenge the offer of the original proponent of an unsolicited proposal through what is called the “Swiss Challenge”. In order to bag the contract, the original proponent should match the counter-offer of the third party. In practice, however, all unsolicitedprojects concluded in the Philippines since the 1990s were clinched by the original proponent except in the case of the controversial NAIA Terminal 3 where the challenger (Philippine International Terminals Co. Inc. or PIATCO) won but the contract was declared null and void by the Supreme Court (SC) due to irregularities.

At the start of its term, the Duterte administration’s economic managers already announced that the government is open to unsolicitedproposals aside from its so-called hybrid PPP – i.e. mobilizing official development assistance (ODA) to build infrastructure and later bidding out its operation and maintenance (O&M) to the private sector. Ang, however, called hybrid PPP as “complicated” and expressed preference for unsolicited proposals for supposedly faster delivery of projects.

Following the President’s pronouncement of openness to unsolicited projects, the latter flooded the government, with project proposalsreaching a total of as much as Php3 trillion in the first year of the Duterte administration according to a news report last year. But most of these are just concepts or ideas, with actual proposals under evaluation by the Investment Coordination Committee (ICC) reaching only three as of the latest (January 2018) projects status report from the PPP Center.

But these three unsolicited proposals are among the just five PPP projects that the PPP Center said could probably be rolled out this year. Two of these unsolicited proposals have SMC as the original proponent – the Php700-billion New Manila International Airport and the Php338.8-billion Manila Bay Integrated Flood Control, Coastal Defense and Expressway Project. The third one is the Php51.17-billion East-West Rail Project of Megawide Construction Corp.

A separate news report said that SMC has an unsolicited proposal to the state-run Philippine National Construction Corp. (PNCC) to expand the Metro Manila Skyway and the South Luzon Expressway (SLEX) for Php554 billion.

Combined, the indicative cost of SMC’s reported unsolicited proposals (Php1.59 trillion) already account for 53% of the cost of all unsolicitedproposals (Php3 trillion) reportedly being pitched to the Duterte administration. To get a better grasp of how huge these two projects are, note that the total amount of all (16) PPP projects that have been awarded since the Aquino administration is “just” Php323.06 billion.

Beyond transparency and corruption

Even PPP advocates while recognizing that the presence of unsolicited proposals is on the rise warn governments to use them with caution and within a strict regulatory framework. In a review of unsolicited projects worldwide, a study commissioned by the Public-Private Infrastructure Advisory Facility (PPIAF) of the World Bank noted that among the common concerns on unsolicited proposals are: (1) lack of transparency in selection and implementation of projects; (2) avoidance of competition; (3) avoidance of due diligence processes; (4) opportunities for corruption and political patronage; and (5) acceptance of poor quality projects (design and/or execution) that do not even meet minimum requirements of any sort, in the name of expediency. The World Bank reportedly prohibits the use of unsolicited proposalsin projects that they fund.

Beyond transparency and corruption issues, however, the greater impact of unsolicited proposals involve how such procurement method further weakens the mandate and capacity of the state to design and implement a rational infrastructure program that is responsive to the long-term needs of the people and the economy. Unsolicited proposals also represent how corporate interests that are mainly driven by profit motivation take over infrastructure development and operation, often at the expense of the country’s overall development and social agenda.

Ideally, infrastructure projects are determined by and consistent with the development plan of a country, meaning projects are initiated and prioritized (including in terms of resource allocation) by government based on such plan. Government’s role goes beyond identification, resource mobilization and construction, and extends to operation and maintenance of the infrastructure.

This has been the practice in many countries including the Philippines until the advent of neoliberalism in the 1980s and its rapid expansion in the 1990s. Government’s role has been reduced to listing down of infrastructure projects and soliciting private investors to build and operate them through bidding or direct negotiation. This is already problematic by itself as it essentially privatizes the infrastructure and distorts its economic and social purpose as commercial viability becomes the primary consideration.

Tailor-made public infra for private interests

Unsolicited proposals thus further detach infrastructure development from specific public needs and interests. With the private proponent initiating the process of identification and conceptualization, unsolicited projects are often not reflective of priority infrastructure needs. In addition, unsolicited proposals reinforce the undue concentration of infrastructure development in urban centers and more developed regions at the expense of poorer regions or areas that need more infrastructure, but where commercial prospects or interests are less for private sector proponents.

There are cases where big business proposes infrastructure projects that are not just meant to supply public needs (and directly profit from it) but are also tailor-made to bolster its other private commercial interests. One example is the unsolicited proposal jointly submitted by SM and Ayala groups to build a Php25-billion 8.6-kilometer elevated toll road that will supposedly help decongest traffic along EDSA. But the project will actually benefit the two conglomerates’ property development interests as the proposed toll road would also increase access to the SM Mall of Asia complex and Ayala’s Makati business district. SMC is questioning the SM-Ayala proposal because it will allegedly duplicate the existing SMC-operated NAIA Expressway and affect traffic volume (and profits).

But while SMC is questioning the need for the SM-Ayala’s unsolicited toll road, the wisdom of its own unsolicited New Manila International Airport is also questionable. Under its proposal, SMC will build a massive Php700-billion airport spanning thousands of hectares along Manila Bay in Bulakan, Bulacan with six parallel runways and an initial 100-million passenger capacity (thrice of NAIA’s). But it will also just duplicate the recently awarded Clark International Airport Expansion Project (a solicited PPP deal bagged by Megawide) whose further expansion has lower social (as a new infrastructure, the Bulacan airport could potentially displace more communities) and financial costs (e.g. there are three separate unsolicited proposals to develop Clark airport from JG Summit, Megawide, and Manny Pangilinan’s group with costs ranging from Php187 billion to Php337 billion).

For SMC, the agenda is not just to build and operate an airport that would be an alternative to the highly congested and inefficient NAIA. What SMC wants to build is an “aerotropolis” or a metropolis revolving around an airport. Aside from the 1,168-hectare airport, the plan includes a 2,500-hectare city complex which gives the giant conglomerate additional potential profits from property development as well as a toll road that will link with NLEX, on top of running the airport.

No guarantees

According to the BOT Law and its IRR, unsolicited projects are not entitled to direct government guarantee, subsidy or equity. Nonetheless, like solicited PPP projects, they are still eligible for other perks including investment incentives under the Omnibus Investment Code and performance undertaking (i.e., a government guarantee that it will assume responsibility for the performance of an agency’s obligations under the contractual arrangement including the payment of monetary obligations, in case of default) such as what SMC’s unsolicited MRT-7 project enjoys. They even enjoy “security assistance”, or the deployment of police or military forces in the vicinity of the project site to provide security during the implementation of the project up to completion.

The BOT Law requires as well that proposals be innovative and offer a new concept or technology. But it is unclear what is particularly innovative in an airport in Bulacan or an MRT along Commonwealth Avenue to pass as unsolicited projects. Indeed, a 2012 assessment ofunsolicited projects prepared for the PPP Center (with support from the Asian Development Bank or ADB) concluded that “most (unsolicited)proposals did not really offer new technology”.

What is clear is that there are no guarantees that the country’s chronic infrastructure crisis, which is being used to justify more unsolicitedproposals and negotiated deals, would be solved with more unsolicited projects. On the contrary, undue public burden could increase as numerous but disjointed or impractical networks of roads, airports, and other infrastructure are built through self-serving unsolicitedprojects by big business interest.

AFP-PNP group calls for Duterte’s ouster

A group claiming to be officers and members of the Armed Forces of the Philippines (AFP) and the Philippine National Police (PNP) called for the ouster of President Rodrigo Duterte for “betrayal of public trust.”

In a statement issued Monday, the Patriotic and Democratic Movement (PADEM) said they condemn and hold Duterte accountable for alleged gross crimes that violate national sovereignty and democratic rights of the people.

“We pledge to work for the withdrawal of military and police support for Duterte and his administration in conjunction with mass mobilization of the Filipino people in millions to manifest their demand for the resignation or ouster of Duterte and his administration,” the group’s spokesperson Antonio Bonifacio said.

PADEM said Duterte and his administration committed the following crimes:

  1. Treating the AFP and the PNP as these were his private armies and practising favoritism and violating professional and service standards in the promotion and assignment of officers;
  2. Corrupting the PNP and the AFP with a system of monetary awards for the extrajudicial killing of alleged illegal drug users and of NPA suspects;
  3. Condoning and protecting top-level illegal drug lords (including Davao City vice mayor Paolo Duterte) and protectors (at the level of governors and generals);
  4. Emboldening /Inciting police officers to engage in extrajudicial killings of poor suspected illegal drug users and pushers by publicly telling officers to plant evidence and by guaranteeing their pardon and promotion in case of conviction;
  5. Aggravating corruption in government and criminality through the collusion of Duterte trustees and crime syndicates;
  6. Allowing China to occupy maritime features in the West Philippine Sea and to violate Philipine sovereign rights upheld by decision of the Arbitral Tribunal in accordance with the UN Convention on he Law of the Sea;
  7. Bungling the operations in Marawi City and indiscrinately destroying lives and property through aerial bombings, artillery and mortar;
  8. Favoring certain Chinese businessmen and Duterte relatives and cronies in the award of projected infrastructure projects using loans from China;
  9. Betraying the sovereign rights of the Filipino people by making the Philippines a debt vassal of China and offering to China the oil and gas resources under the West Philippine Sea as collateral for Chinese loans; and
  10. Seeking to replace the partnership with the United States in matters of national security with an even more lopsided relationship with China and Russia.

“Upon the change of administration, we pledge to follow the principle of civilian supremacy and support a new civilian administration, in accordance with the 1987 Constitution and the rule of law,” Bonifacio said.

PADEM is the first group of disgruntled AFP and PNP personnel to form and call for Duterte’s ouster.

Unfounded and uncalled for

The AFP quickly downplayed the group and declared its full support to Duterte.

“The AFP categorically denies the recent statement issued by a group that pretends to be representative of the men and women of the AFP and the PNP that calls itself the Patriotic and Democratic Movement (PADEM),” AFP spokesperson BGen. Restituto Padilla Jr., said.

“Such issues are clearly politically motivated and a matter that the AFP does not and will not subscribe to,” he said.

Padilla warned the military will act against forces that undermine the Duterte government, especially through unconstitutional means.

“Current developments and issues that this group wishes to take advantage of is now being addressed by the Department of Justice and parties to a possible crime are now under detention. Let us respect these processes and not allow ourselves to be used by individuals or groups with vested interests,” he said.

“The AFP appeals to the public and the various political groups to respect the apolitical stance of the AFP and help bring unity and healing instead of fomenting divisiveness and collapse,” he added.

The AFP and the Philippine Constabulary-PNP, however, has contributed to the ouster of Presidents Ferdinand Marcos and Joseph Estrada by their withdrawal of support in 1986 and 2001, respectively.

Corrupt and cruel regime

PADEM, however, immediately earned the support of a former officer and Philippine Military Academy (PMA) professor.

“Fellow PMAers, let us join the Patriotic and Democratic Movement (PADEM),” Professor Dante Simbulan said on his Facebook account.

A member of PMA Class of 1952, Simbulan returned to his alma mater in 1965 after active field duty in the AFP.

But Simbulan left the PMA in 1967 due to “more disillusionment,” saying the PMA only produces soldiers for the status quo.

He was credited for influencing Lts. Crispin Tagamolila and Victor Corpuz who both defected to the New People’s Army and inviting Jose Maria Sison to lecture at the academy.

Strongman Ferdinand Marcos detained Simbulan for three years from 1974 without charges. In 2016, he published the book “Whose Side Are We On?”

“It is time to put an end to this (Duterte’s) corrupt and cruel regime!” Simbulan said. # (Raymund B. Villanueva)

Cagayan execs urge new Ceza chief: probe Port Irene ‘skeletons’

Report and photo by Melvin Gascon

BAYOMBONG, Nueva Vizcaya—Local leaders in Cagayan recently called on the newly-installed administrator of the Cagayan Economic Zone Authority (Ceza) to launch an “honest-to-goodness” investigation of supposed irregularities in the operations of its freeport in Santa Ana town.

Gov.  Manuel Mamba urged lawyer Raul Lambino, who took his oath as new Ceza administrator last July 24, to immediately order a probe “to stop all illegal activities and corruption perpetuated by the past administration.”

The governor said the new Ceza chief should reassess the viability of Port Irene as an international port, the operations of which, he said, have been marred by allegations of corruption.

“Billions of public funds have been poured into Port Irene, for which only a pittance was derived by government in the last 23 years of its existence, and for which transparency and accountability in its operation is seriously demanded,” Mamba said. 

Bloated

Port Irene is the main port of the CSEZFP in Casambalangan village in Santa Ana, which for several years became the hub of two of Ceza’s controversial industries: used car importation and export of magnetite sand.

It is also the location of the P5-billion breakwater project, for which the late Senator Miriam Defensor Santiago raised red flags in a Senate expose for alleged overpricing, having been constructed by a firm linked to Senator Juan Ponce Enrile. 

Enrile was the main author of Republic Act 7922, the law which created CEZA and declared inclusion of the entire Santa Ana town and two island territories of Aparri town within the economic zone. 

Enrile’s daughter, Katrina, sits as a Ceza board director.

In 2013, the sale of second-hand vehicles at the Cagayan freeport was stopped after the Bureau of Customs clamped down on the trade by refusing to process their release and registration papers, citing a Supreme Court ruling earlier nullifying an executive order Ceza used as basis for the importations.

The shutdown led to the eventual wastage of about 900 second-hand vehicles imported from Japan and Korea, which until today are left rotting in a five-hectare car depot in Casambalangan.

The shipping of magnetite sand, meanwhile, was halted in 2014 following the departure of several Chinese firms earlier given what critics described as “dubious” permits to extract black sand (magnetite) from the coastal and riverbank communities of northern Cagayan.

Wasted

According to government records, Chinese firms shipped out more than 2.4 million tons of magnetite from Cagayan to China through Port Irene for a period of five years, from 2009 to 2014.

Two of its biggest licensees for its gambling operations, Eastern Hawaii Gaming and Leisure and Meridien Vista Gaming Corp., have been dragged in suits and investigations over alleged money laundering and illegal gambling operations.

Ceza-issued working visas were also cited at a Senate investigation last year for their involvement in alleged human trafficking, economic sabotage and bribery charges against Chinese gambling operator Jack Lam.

“(The previous use of Port Irene) has been a waste of opportunity and government funds in its 23 years of existence. We have to look for a new alternative port that is more secure, and can allow the entry of bigger ships with international routes,” Mamba said.

Santa Ana Mayor Darwin Tobias, for his part, also said Lambino should first clean up the mess that was left behind by his predecessor, to “start with a clean slate.”

“He should be wary whom he trusts (within Ceza) because there are some people there who are behind all the anomalies that hounded the agency for many years,” he said.

Tobias, who sits as a member of the Ceza board, expressed hope, however, of having “better” working relations with Lambino. 

Ceza and the Santa Ana government have perennially been at odds over conflicts of policies between officials, mainly between Tobias and Jose Mari Ponce, the former Ceza administrator and Lambino’s predecessor.

Things came to a head in 2013 when Ponce’s son lost to Tobias in a hotly-contested mayoralty race.

Upon taking up his post, Lambino, in a press statement, announced his plans of repairing Port Irene, the dredging of its “heavily silted” seabed, and the construction of additional wharves “to expand its capacity.”

“As the President’s personal choice, I will lead by example and turn the (CSEZFP) into his vision of a vibrant economic growth center that is efficient and clean and free of corruption,” said Lambino, described as “a stalwart” of President Duterte’s party”, Partido Demokratiko Pilipino Lakas ng Bayan (PDP Laban).

He vowed to transform CSEZFP “into a bustling economic growth center and tourist destination and a major trans-shipment and logistics hub in Northern Luzon.” #

Groups insist on government accountability for Yolanda Victims

On the third anniversary of Supertyphoon Haiyan (Yolanda) Bagong Alyansang Makabayan-National Capital Region held a symbolic candle-lighting ceremony for the victims and survivors of the disaster last November 8 in Quiapo, Manila.

Bayan-NCR chairperson Raymond Palatino said the Benigno Aquino administration should still be held accountable for what they say was its inefficient and unjust response to the disaster.

Officials of the current Rodrigo Duterte government have reported that while many of the victims and survivors have still to receive material and monetary aid, only P30 million of the Yolanda rehabilitation funds remain from hundreds of billions.

The protesters are also calling for continuing rehabilitation of areas and citizens in the affected areas. Read more