Philippine Government Procurement 2007-2011 PDF

II. Background A. Government Procurement Context Public sector procurement is increasingly becoming a significant component of the overall budget. In the period 2007 – 2010, government procurement accounted for an average of 3.86% of GDP and 21.2% of total government budget. For 2011, public procure...

II. Background A. Government Procurement Context Public sector procurement is increasingly becoming a significant component of the overall budget. In the period 2007 – 2010, government procurement accounted for an average of 3.86% of GDP and 21.2% of total government budget. For 2011, public procurement is projected to reach approximately P308 billion or 18.7% of total government budget (Table 1). TABLE 1: PHILIPPINE GOVERNMENT PROCUREMENT BUDGET 2007-2011 (Php’000) Expense Classs 2007 2008 2009 2010 2011 Maintenance & Ooperating Expenses Repair and Maintenance Supplies and Materials Utility Expenses Training and Scholarship Expense Prof essional Serv ices Printing nd Binding Expenses Adv ertising Expenses Subscription Expenses Subtotal (A) 23,465,563 24,988,621 21,771,084 25,021,782 27,763,401 39,637,080 41,277,811 48,635,923 44,274,234 43,433,069 6,442,858 6,705,812 6,834,835 8,253,051 8,533,803 6,209,303 7,160,583 11,843,028 9,192,594 13,372,926 15,964,613 22,805,652 31,559,649 23,184,888 19,071,665 1,871,709 1,131,623 1,303,719 1,232,892 1,263,446 609,565 891,073 960,280 827,372 1,062,623 171,309 132,796 6,949,257 238,528 247,884 94,372,000 105,093,971 129,857,775 112,225,341 114,748,817 Capital Outlay Land and Land Improv ement Buildings and Structures Of f ice Equipment Transportation Equipment Machineries and Equipment Public Inf rastructure Subtotal (B) 12,127,661 5,525,203 11,723,151 5,440,485 6,161,027 8,472,219 10,837,703 10,997,394 22,694,122 38,662,260 4,944,178 5,583,390 9,309,847 7,357,548 6,833,778 1,380,911 2,524,880 4,524,978 2,104,774 1,580,823 8,084,841 11,996,851 9,361,146 10,679,190 10,170,871 99,936,131 138,463,865 168,035,648 151,048,823 129,923,265 134,945,941 174,931,892 213,952,164 199,324,942 193,332,024 Total 229,317,941 280,025,863 343,809,939 311,550,283 308,080,841 Percent of National Government Budget Percent of Gross Domestic Product 19.84% 3.45% 21.30% 3.77% 23.90% 4.47% 20% 3.74% 18.70% 3.40% source: Budget of Expenditure and Sources of Financing (2010 & 2011), Department of Budget and Management There is no single operating unit responsible for the government procurement function. Procurement is decentralized, with each agency maintaining responsibility for and control over its own procurement activities. The government procurement system has always been perceived to be “a cumbersome, fragmented process with many loopholes 3 that are prone to corruption opportunities by both dishonest officials and bidders”. 2 There were a large number of overlapping procurement laws, rules and regulations and many agencies dealing with procurement have duplicating if not unclear functions and accountability. These complexities have resulted either in the procurement of substandard goods and services or in inefficiencies resulting in delays in completing projects and delivering services. Competition has been perceived to be generally low, with little or no participation from foreign bidders. B. Procurement Reform In 2003, with strong support of its development partners, the government enacted Republic Act 9184 known as the Government Procurement Reform Act (GPRA)3. This new law paved the way for adopting key international procurement best practices and standards by (i)harmonizing over 100 laws, rules and regulations, (ii)standardizing bidding procedures and documents, (iii)increasing the accountability of bidding organizations, and (iv)streamlining the procurement system. Through the GPRA, the Government Procurement Policy Board4 (GPPB), was created as the policy and monitoring body mandated to act as oversight agency for all procurement matters affecting national interest. More importantly, the GPRA institutionalized and mainstreamed the use of the Philippine Government e-Procurement System5 (PhilGEPS). The GPRA mandated all national government agencies (NGAs), government owned and controlled corporations (GOCCs), state universities and colleges(SUCCs) government financial institutions (GFIs) and local government units(LGUs) to post all procurement opportunities, bid results, awards and other related information in the procurement of goods and general support services, civil works and consulting services. It also reduced the advertisement requirements for bid opportunities costing P2 million and above for goods, P1 million and above for consulting services, and P5 million and above for civil works, which immediately reduced by more than 50% the governments newspaper advertisement costs. Because of its success at passing the GPRA and instituting reform measures that include the operation of the PhilGEPS, the Philippines scored 95 or “very strong” in the subcategory of “Government Procurement: Transparency, Fairness, and Conflict of Interest Safeguards” of the 2010 Global Integrity Report. The overall classification however, was 57 or “very weak”, a downgrade from the 2008 overall score of 71 or “moderate”. This was primarily due to the subcategories on Anti-Corruption mechanisms, Judicial Independence and Law Enforcement Safeguards. 2 Philippine Country Procurement Assessment Report, A Joint Document of the Government of the Philippines, the Asian Development Bank and the World Bank, October, 2008, page 15. wwwwds.worldbank.org/external/default/main?pagePK= 3 http://www.lawphil.net/statutes/repacts/ra2003/ra_9184_2003.html 4 http://www.gppb.gov.ph 5 http://www.philgeps.net 4 C. Drivers for Implementing E-Procurement The establishment of the PhilGEPS is in line with the thrusts of the government to advance the use of information technology in public sector governance pursuant to the E-Commerce Act(Republic Act 8792). The E-Commerce Act promotes the use of electronic transactions in government with the general public through a number of initiatives. It identifies e-procurement as a strategic tool in increasing national competitiveness by reducing procurement costs both for the government and the private sector. The Philippine Development Plan (PDP) 2011-20166 acknowledges the importance of building upon the GPRA in pursuing a national good governance agenda. It underscores the need to enhance productivity, improve efficiency and ensure greater transparency and accountability in government procurement. It recognizes the use of ICT systems like the PhilGEPS for reducing opportunities and incentives for graft and corruption by minimizing discretion and intervention in the procurement process. It advocates the widening use of the PhilGEPS in the bidding process of government agencies to ensure greater participation and cost effectiveness in procurement. 7 The newly crafted Philippine Digital Strategy (PDS)8 that supports the PDP sets the development of e-government as a priority and puts emphasis on “integration and interoperability of government ICT structures and programs”. It validates the role of PhilGEPS in sharing more government data online for improving the efficiency of government procurement operations. It confirms the need to strengthen PhilGEPS as one of its key action areas leading to its goals for “transparent and efficient government services”.9 III. The PhilGEPS A. History of the PhilGEPS In 2000, the Secretary of the Department of Budget and Management (DBM) initiated a web-based pilot electronic procurement system (EPS) as part of its reform initiatives for modernizing the government procurement process. Executive Order(EO) 26210 and EO 32211 issued by then President Estrada authorized the Procurement Service(PS), the agency responsible for procuring all common-use supplies, materials and equipment, to launch the internet-based EPS. It directed all national agencies and government owned or controlled corporations to participate in its use. At that time, it was positioned as a government owned and managed service designed to increase the operational efficiency of the PS in managing its procurement process. However, it made provisions for the eventual use of the system by the whole of government. The EPS also provided a common portal for registration of suppliers and advertisement of bid opportunities by 6 http://www.neda.gov.ph/PDP/2011-2016/default.asp Philippine Development Plan 2010–2016, National Economic and Development Agency, Chapter 7, page 18. 8 www/cict.gov.ph 9 The Philippine Digital Strategy, Commission on Information and Communications Technology, 2011, Chapter 2. 10 http://elibrary.judiciary.gov.ph/index10.php?doctype=Executive%20Orders&docid=12136853611830343075 11 http://www.gppb.gov.ph/laws_rules/laws/EO_322-2000.pdf 7 5 government agencies. The pilot EPS was launched with technical assistance from the Canadian International Development Agency’s (CIDA)12 Policy, Training and Technical Assistance Facility (PTTAF) Project. 13 When then President Gloria Macapagal-Arroyo assumed office in 2001, good governance and competitiveness were identified to be fundamental for the country’s growth and development. To comply with the provision of the Electronic Commerce Act (R.A. 8792)14 requiring government to establish an electronic procurement portal, EO 40 was promulgated in October 2001 adopting the EPS to be the single and centralized electronic portal for all of government’s procurement. The EO expanded the existing coverage of the EPS to all agencies of government at the national and local levels including government financial institutions and state owned universities and colleges. EO 4015 underscored the importance of the EPS as a tool for enhancing transparency, accountability and equity in government procurement and recognized the mandate of the Procurement Service (PS) to be the organization responsible for the development, management, and maintenance of the EPS. B. The Pilot Electronic Procurement System (EPS) The EPS service was based on the e-procurement model used by the Canadian Federal Government and various other levels of government and public agencies in Canada. The service provides a common portal for registration of suppliers and advertising of government bid opportunities by government agencies, and an electronic catalogue that features the different common-use goods, supplies and materials which agencies purchase from the PS. It does not have any responsibility for the procurement activities and bid evaluation. The service grew to support a few thousand agencies, publishing tender notices that include those for civil works, consulting services and other goods, and distributing tender documents to more than 30,000 vendors. The objective of operating the pilot was to help the DBM and the PS gain a better understanding of the resource requirements for supporting and operating an electronic procurement system across multiple organizational levels. By operating the system, the government was able to (i)explore functionality and features, (ii)review systems design and architecture, (iii)identify operational risks, (iv)establish strategies for implementation and (v)evaluate funding source, in preparation for the construction of their own electronic procurement system. Initially, the EPS was hosted by the MERX system16, the same platform being used by the Canadian government for its procurement activities. In 2004, a five-year US$5 12 http://www.picpa.com.ph/getmedia/bc4039f5-e1c4-4728-af43-168e826e09b2/geps.aspx Technical assistance from the PTTAF project included support for the business process definition, design and operation of the pilot system, outsourcing, training and contract management including reviewing the detailed specifications, reviewing the Test Plans, preparing the User Acceptance Test Plans and the conduct of operations with the third party service provider. 14 http://www.lawphil.net/statutes/repacts/ra2000/ra_8792_2000.html 15 Executive Order (EO) 40 entitled Consolidating Procurement Rules and Procedures for all National Government Agencies, Government owned or Controlled Corporations and Government Financial Institutions and Requiring the Use of the Government Electronic Procurement System. 16 http://www.merx.com/ 13 6 million outsourced contract was awarded to a local service provider to construct and operate an electronic system and build additional functionalities. In mid 2006, the EPS was replaced with the PhilGEPS that makes available the same features as the EPS with systems enhancements and modifications drawn from the experience of operating the pilot system. C. Organizational Function, Structure and Staffing The PhilGEPS is the single portal to serve as primary source of all government procurement information.17 The main objectives of the PhilGEPS are: (i) To establish an open, transparent, efficient and competitive marketplace for government procurement; (ii) To get better prices; (iii) To build the framework to continually improve the procurement processes; and (iv) To maintain sustainability of its operations over the long term. To achieve these objectives, the PhilGEPS: (v) manages and operates the service, (vi) provides regular training to all its users and, (vii) provides customer service support such as the help desk and other administrative support. (viii) Undertakes business development and marketing initiatives to grow and sustain its supplier base The PS is the organization responsible for the strategic definition of the PhilGEPS and its management. The PS Executive Director assumes responsibility for all activities inherent to the PhilGEPS and provides general supervision, direction and control over the work of all employees. The responsibility for the day-to-day operational management of the PhilGEPS rests with the PhilGEPS Group. The PhilGEPS Group is lead by a PhilGEPS Director who reports to the Executive Director of the PS. The Executive Director of the PS and the PhilGEPS Director are interdependently responsible for planning, organizing, leading and controlling the PhilGEPS operations while the Secretary of the DBM provides overall leadership. The current PhilGEPS organization is composed of 15 contractual and 8 job order positions. The PS, and by extension the PhilGEPS, is under the administrative supervision of the DBM while functional supervision is with GPPB, an inter-agency body headed by the Secretary of the Department of Budget and Management as chairperson and the Director-General of NEDA as alternate chair with the secretaries of Public Highways, Finance, Science and technology, Health, Trade and Industry, Transportation and Communication, Education, Defense, Energy and Interior and Local Government, and a representative from the private sector as members. 17 Government Procurement Reform Act, Section III, Article 8 7