State procurement scheme a magnet for controversies--expert
By Daxim Lucas
Philippine Daily Inquirer
First Posted 20:15:00 02/08/2008
MANILA, Philippines -- A high proportion of government procurement controversies -- in the guise of infrastructure projects -- exposed in this country came courtesy of so-called “unsolicited proposals” like the $329-million National Broadband Network deal, an expert said.
Dr. Gilbert Llanto, senior research fellow of the Philippine Institute for Development Studies (PIDS), pointed out that weaknesses in the Build-Operate-Transfer (BOT) Law make the system vulnerable to scams.
In particular, he zeroed in on mechanisms which actually make it difficult for competitive bidding among project proponents to take place like the “Swiss challenge” scheme used when evaluating unsolicited proposals.
Under this method, it is “really difficult for a competitor to mount an effective challenge especially given the time constraints,” said Llanto, who as former deputy director general of the National Economic and Development Authority (NEDA) oversaw the evaluation of many big-ticket infrastructure projects.
The Swiss challenge is a method used to help ensure that the government gets the best possible deal when faced with an unsolicited project proposal from the private sector.
Under the scheme, the government would invite competitors to try to improve on the deal offers by the original proponent. The original proponent would then get the right to win the deal by merely matching any better terms offered by his competitors -- a right he holds by virtue of having proposed a project that the government had not thought of by itself.
Some big-ticket projects that have undergone a Swiss challenge include the Caliraya-Botocan-Kalayaan power plant of Argentine firm Impsa, the Naia Terminal 3 of the Philippine International Air Terminal Co. (PIATCo) and the MRT-7 line awarded to the Universal MRT Corp. last year.
In the case of the NBN project, however, Amsterdam Holdings Inc. the company owned by Jose de Venecia III which claims to be the original proponent of the project, never even got to the Swiss challenge phase.
In early 2007, company officials complained to the Department of Transportation and Communications (DOTC) that its proposal for a build-operate-own (BOO) project -- a sub-type of the BOT scheme -- had been ignored while it awarded the very same project to China's ZTE Corp. shortly after.
ZTE's proposal was to be funded by a $329-million government-to-government loan which did not go through a competitive selection process, with both the supplier and creditor having been chosen by the Chinese government.
Llanto said it is impossible to come up with a hard and fast rule preferring BOT projects over loan-funded ones, or vice versa.
“The BOT scheme was put in place to help a government that was having fiscal difficulties,” he said. “Infrastructure projects are expensive and 'lumpy'.”
Under the BOT scheme, the government could still enjoy the benefits of having put up infrastructure using the financial muscle and technical expertise of the private sector.
Many of these companies have better access to financing,” he said. “Many have better credit ratings than the [Philippine] government (and could therefore raise money at lower cost).”
We also want to take advantage of the private sector's familiarity with technology, especially in the case of telecommunication,” Llanto added
Nonetheless, there are weaknesses in the BOT Law which allow graft and corruption to occur, prompting Llanto and his former colleagues at NEDA to push for changes.
NEDA Director General Augusto Santos said the proposed changes -- which have languished for over a year because three of the 10 line agencies involved have so far refused to endorse them -- would streamline the approval process, reducing the possibilities of graft in the system.
Santos added that controversies like the ZTE scam could be avoided in the future if only policy makers at the NEDA's Investment Coordination Committee had more information about all the project and proponents to make a more informed decision.
Both Santos and Llanto agree, however, that infrastructure projects, whether undertaken through BOT or tied loans are “not free.”
If it is a solicited BOT [project], the government may provide a guarantee and it will have a contingent liability,” Llanto said. “If it is a government-to-government loan, we will have to buy from a supplier of the same nationality as the creditor government.”
Either way, we have to pay,” he said.
|
