WB bans 3 RP firms in road construction

Graft found in bidding for gov’t projects

Filed Under: World bank road mess, Graft & Corruption, Heavy construction, Infrastructure, International Economic Institutions, Government Contracts

In a statement issued on Wednesday, the World Bank said its investigation had "uncovered evidence of a major cartel involving local and international firms bidding on contracts under Phase 1 of the Philippines' National Roads Improvement and Management Program, known as NRIMP 1."

As a result of the World Bank findings, the Philippine government has temporarily disqualified all seven firms from participating in biddings for public construction projects, whether funded by state revenues or by local and foreign lenders.

Budget Secretary Rolando Andaya Jr. said the Department of Public Works and Highways (DPWH) would decide in 15 days if the firms would be permanently disqualified.

The Philippine firms blacklisted by World Bank are the Cavite Ideal International Construction and Development Corp. and CM Pancho Construction Inc. (both barred for four years), and E.C. de Luna Construction Corp. (barred permanently).

The others are China Road and Bridge Corp. (barred for eight years), China State Construction Corp. and China Wu Yi Co. Ltd. (both barred for six years) and China Geo-Engineering Corp. (barred for five years).

$33-M release stopped

The seven firms were found to have engaged in corrupt and unsound practices as they vied to serve as contractors for NRIMP 1, a project involving various road developments all over the country that the World Bank had earlier agreed to fund.

The firms were said to have colluded with government officials responsible for implementing the bidding process for NRIMP 1.

The World Bank said no funds from the project were disbursed to the now-sanctioned firms. It said it had stopped about $33 million from being awarded.

"This is one of our most important and far-reaching cases, and it highlights the effectiveness of the World Bank's investigative and sanctions process," said Leonard McCarthy, World Bank vice president for integrity.

The probe "closely analyzed the procurement process the firms participated in and conducted numerous interviews before closing the investigations and initiating sanctions proceedings against the entities," the World Bank said.

But The Associated Press quoted Rhoda Marigsa, vice president for human resources of E.C. de Luna, as saying that all the firm's projects were aboveboard.

"There is no evidence to support the allegations. We're still waiting for the official decision," Marigsa said.

NRIMP 2 still go

She said the firm had completed road projects "ahead of time" and was paid by the Philippine government and foreign partners, who she did not name.

But despite the World Bank's decision to reject funding the $33-million worth of contracts for NRIMP 1, it will continue to fund the second phase of the project.

It had earlier said that its board approved the funding of NRIMP 2 at $232 million.

The second phase of the project will involve the improvement of 450 kilometers of national arterial roads and bridges and the establishment of a comprehensive road maintenance program.

The $232 million will also be used to fund reform programs designed to improve the efficiency of the DPWH and its ability to manage road projects.

"If the World Bank did not believe in the [procurement] system here in the Philippines, then it would not have given the go-signal for the second part," Andaya said at a briefing following a meeting in Malacañang with World Bank country representative Bert Hoffman and Finance Secretary Margarito Teves.

Probing officials in cahoots

Andaya, who heads the Government Procurement Policy Board, said the Office of the Ombudsman had begun investigating the government officials who might have colluded with the blacklisted firms.

He said the Ombudsman had been given until the first week of February to complete its probe.

Review of projects

President Gloria Macapagal-Arroyo has ordered a review of all World Bank-funded projects in the country, according to Anthony Golez, her deputy spokesperson.

Golez told reporters at a briefing that the matter would be discussed in the next Cabinet level to "make sure that we can put a stop" to the corrupt practice.

"We will file appropriate charges against people who will be found guilty of these allegations," he said, adding that one of the administration's programs was to "weed out corruption."

Lorelei Fajardo, Ms Arroyo's other deputy spokesperson, said Malacañang had also ordered the Department of Trade and Industry to look into the activities of the three blacklisted Philippine firms and come up with appropriate recommendations.

But Public Works Undersecretary Manuel Bonoan said the DPWH would allow the blacklisted firms to finish their contracts involving projects not assisted by the World Bank and to take part in other infrastructure projects in the Philippines.

Bonoan also said action against the three Philippine construction firms was being deferred pending the department's study of the World Bank's corruption report.

"We will have to see what we will do, department-wise. We need to look into the merits of the World Bank investigation and check on the details because the debarment process was an initiative of the World Bank," he said.

'Learning experience'

Andaya said the World Bank had forwarded information on the blacklisted firms to the Ombudsman.

"It was a learning experience," he said of the World Bank's findings.

Said Budget Undersecretary Laura Pascua: "It's good that those involved in unsound practices were penalized. The Ombudsman's investigation will shed light on what really happened [in the bidding for NRIMP 1] and what should be done to improve the procurement processes."

Pascua told the Philippine Daily Inquirer that the reported collusion in the bidding for NRIMP 1 should also prod the Procurement Transparency Board-headed by Andaya and with private sector representatives and other government officials as members-to study the current process of procurement and recommend reforms.

Key improvements

Andaya said that as a result of the blacklisting, the government and the World Bank agreed on key improvements-such as the inclusion of an internal auditor, procurement adviser, and a civil society representative in the procurement process-pending the result of the separate inquiries of the DPWH and Ombudsman.

He said the government would also produce a "harmonized" set of procurement rules with the World Bank and other donors. With reports from Christian V. Esguerra, Kristine L. Alave, Agence France-Presse, Associated Press