World Bank OKs $232-M road program loan
Anticorruption measures put in place
By Doris Dumlao
Philippine Daily Inquirer
First Posted 00:37:00 05/15/2008
Filed Under: Foreign Aid, Road Transport, International Economic Institutions, Graft & Corruption
The World Bank has agreed to proceed with a controversial road funding program for the Philippines after tighter safeguards were put in place to prevent a recurrence of alleged collusion and bid-rigging that jacked up road contract costs by as much as 30 percent during the earlier phase of the project’s implementation.
Believing there was a compelling case to continue its support for the Philippine road sector, the bank’s executive board cleared in Washington, DC on Tuesday a $232-million loan for the second phase of the national roads improvement and management program (NRIMP-2), accounting for about 40 percent of the total project cost.
NRIMP-2 seeks to finance the improvement of 450 kilometers of national arterial roads and bridges and a comprehensive road maintenance program, a significant number of which are in the poorer provinces as well as conflict-affected areas of the Visayas and Mindanao.
“This project is not just about building roads; it is also about building stronger governance and fighting corruption,” World Bank country director Bert Hofman said at a joint media briefing with the Philippine government Wednesday.
The total project cost for the second phase is $576.02 million, of which $333.52 million will be covered by counterpart funding from the national government. The remaining $10.5 million will be provided as a grant by the Australian Agency for International Development to beef up the financial management and internal audit control of the Department of Public Works and Highways (DPWH), lead agency for the four-year infrastructure project, and support the coalition of civil society groups which will provide independent project oversight.
Last November, the World Bank’s international investigations unit concluded that in the first phase of the road program (NRIMP-1), a “cartel of contractors had engaged in corrupt and collusive practices in three rounds of bidding, undermining competition in roads construction in the Philippines and inflating prices up to 30 percent.”
Signs of bid-rigging were identified by the bank’s supervision team in the procurement of two road contracts as early as 2003 under NRIMP-1 and the bank rejected the award of the contracts. Two further rounds of bidding in 2004 and 2006 showed similar signs and were also rejected.
The bank’s investigation was concluded and the findings disclosed to the Philippine government in November 2007, during which the World Bank board also deferred approval of the bank’s funding for the second phase.
“Lessons learned from that investigation enabled us to strengthen NRIMP-2 with a battery of stronger anticorruption measures,” Hofman said.
These preemptive measures, which aim to increase competition and transparency in the procurement process, include:
• The use of an independent procurement evaluator to provide expert second opinion on contracts to improve the transparency and integrity of procurement processes.
• Tightening of procurement controls to ensure the reliability of contract cost estimates, detect overpricing through bid analysis, enhance supervision control over contract variations and disseminate complaints mechanism in bid documents.
• Strengthening of internal controls and internal audit capacity in the DPWH.
• Increased use of computerized business systems and enhanced processes for procurement and financial management in order to improve the efficiency of transaction processing and reduce opportunities for interference.
• Establishment of a coalition of citizen and road user groups named “Road Watch” to strengthen the voice and influence of citizens in ensuring transparency and proper use of public funds for roads and to counter corruption at high levels of government and society.
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