MARCH 2002
THE TRILLANES PAPERS Corruption in the Philippine Navy Procurement System

by LT ANTONIO F TRILLANES IV PN


In 2001 and 2002, Lt. SG Antonio F. Trillanes IV, prepared two term papers for his master's classes at the University of the Philippines National College of Public Administration and Governance. Both papers deal with what the author portrayed as widespread corruption in the procurements system of the Philippine Navy. The PCIJ is posting these papers not because it sympathizes with Trillanes’s cause but as a contribution to the public’s desire to understand the roots of the young officers’ disaffection with government and the armed forces.

In the October 2001 paper, Trillanes listed the prevalent forms of corruption, ranging from outright bribery or lagay to rigged biddings and ghost deliveries. His descriptions hew closely to the forms of bureaucratic corruption documented by the PCIJ in its investigations of procurements in such agencies as the Department of Education and the Department of Agriculture. The Navy is particularly prone to such forms of corruption because of the highly specialized nature of its procurements that make it possible to justify negotiated bids and thereby make under-the-table deals with suppliers.

In writing the March 2002 paper, Trillanes surveyed 30 Navy suppliers on their perception of the extent of corruption in Navy procurements. His findings show that paying grease money and negotiated and rigged biddings are the most common forms of corruption encountered by the suppliers. The survey also showed that the offices within the Philippine Navy that are most corrupt include the Commission on Audit branch there, the Accounting Office; and the Procurement Office. Suppliers said they resorted to payoffs in order to expedite the processing of papers and to obtain contracts.


INTRODUCTION
On February 2001, the Philippine Navy (and the AFP) was rocked by a leadership crisis when the Philippine Marines (PMAR) demanded the relief of the Flag-Officer-In-Command, Rear Admiral Wong (Pazzibugan 2001). The crisis was triggered by the berating of the Marines by RAdm Wong for alleged irregularities in the procurement of P3.8 million worth of Kevlar Helmets (Pablo 2001). In the events that followed, the Marines prevailed and RAdm Wong was stripped of his command and was "promoted" to an ambassadorial post. The crisis, while it was eventually resolved peacefully, exposed a previously unseen face of the Navy, and that is the face of CORRUPTION.

BACKGROUND: THE PHILIPPINE NAVY
The Philippine Navy (PN) is one of three branches of service of the Armed Forces of the Philippines (AFP). Its mission is "to conduct prompt and sustained naval operations in support of the AFP's mission". Among its functions are; to provide naval defense to ensure the sovereignty of the Philippines and to protect the people from external threats; to conduct naval operations in support of air and ground operations; to conduct maritime law enforcement within the territorial waters and Exclusive Economic Zone; to promote safety of life at sea and environment protection; and to assist in national development efforts (NOQC Naval Orientation Reference Handguide, 1997).

The following are the other relevant information about the Philippine Navy:

Personnel — 1,687 Officers, 10,561 EP
Marines — 387 Officers, 7,142 EP

Budget — P6.88B (Source:GAA 2000)

AUTHORITY
The authority of the Philippine Navy and all government agencies to procure is "in accordance with the guidelines prescribed under the Implementing Rules and Regulations (IRR) of Executive Order No. 302' (entitled 'Providing Policies, Guidelines, Rules and Regulations for the Procurement of Goods/Supplies by the National Government') "dated February 19,1996" (this was amended by E.O. 262) "and with due regard to the provisions of the Government Accounting and Auditing Manual". (Manual on Procurement 1999). For the AFP, this was operationalized by the Department of National Defense Department Order Nr 47 dated 30 April 1996 entitled "Delegation of Authority on Local Procurements" and further regulated by J-4 Logistics Directive Nr PC-97-03 dated 01 August 1997.

PROCUREMENT PROCESS

RESEARCH PROBLEMS
This research seeks to resolve the following problems:

  1. Does corruption exist within the procurement system of the Philippine Navy? If so, what are the different forms of corruption being practiced? And, where within the PN bureaucracy do these corrupt practices occur?
  2. Is there a relationship between offices exposed to boundary exchange and corruption propensity?

CONCEPTUAL AND THEORETICAL FRAMEWORK

This research covers two parts. The first part is a descriptive analysis of the existence and extent of corruption, the forms of corruption being practiced, as well as the other variables stated.

The second part would follow the theoretical framework shown below:

From this framework, this research hypothesizes that the boundary exchange processes between PN procurement officials and accredited dealers, which work within the milieu of the procurement system process would result to bureaucratic corruption.

CONCEPTUAL DEFINITIONS

  1. BUREAUCRATIC CORRUPTION — is "defined as a dysfunctional and pathological act that negates the accomplishment of its constitutional mandate of promoting public interest" (Sosmena 1999, 6).

  2. CORRUPTION — "It is the misuse of a public office for personal gain" (Klitgaard 1995). Corruption may be categorized in two ways: individualized or systemic (Carino 1985, 15). Individual corruption is where a person performs a secret moneymaking act in relation to his duties as public official or government employee. While systemic corruption is committed in an agency where "corruption has become so regularized and institutionalized that organizational supports back wrong-doing and actually penalizes those who live up to the old norms" (Caiden 1977, 306). It is "demonstrated when bureaucrats and clients can describe the same illegal process, including such details as bribery rates per service and the way these are shared among the members of the syndicate throughout the agency. Those with 'initiative' and 'daring' share the largesse with their colleagues with less opportunities, thus engulfing everyone in an administrative culture that tolerates, even idolizes, the fruits of corruption". (Carino 1985, 15)

  3. BOUNDARY EXCHANGE — "a value-free interaction" or exchange of boundaries between the client and the public official (as defined by Dr Prosperina Tapales during an interview conducted on 21 March 2002).

  4. PROCUREMENT OFFICIAL — for the purpose of this research, all PN officers, enlisted personnel, civilian employees involved in the PN procurement system would be labeled as procurement officials. They would also include the officials and personnel of the local Commission on Audit office.

  5. FORMS OF CORRUPTION:

  6. A. Lagay — also known as SOP, commission, porsyento, for the boys, etc. This is "grease money" given to the procurement official by the dealer to facilitate the processing of documents or as a return favor for a project given.

  7. B. Tong — extortion or money demanded by the procurement official to a dealer to facilitate the processing of documents.

  8. C. Negotiated canvass or nego — an arrangement made by the dealer and the procurement official to manipulate a canvass method of procurement to ensure that the purchase order would be "won" by the said dealer. This is done by giving all the canvass papers of a certain project to the favored dealer. Thus, effectively depriving other interested dealers.

  9. D. Rigged bidding or bidding-biddingan — an arrangement made by the dealer and the procurement official/s to manipulate a public bidding method of procurement to ensure that the purchase order would be "won" by the said dealer. This is done by the collusion between all the attending bidders, which include the favored dealer, and the Bids and Awards Committee.

  10. E. Ghost delivery or conversion — the process in which government funds allocated through budget releases are "converted" into cash. This is done by preparing procurement documents taken from either a negotiated canvass or a rigged bidding, then, instead of delivering the items stated in the purchase order, the dealer would deliver the cash equivalent of the goods in the purchase order, less certain percentages for the dealer's profit.

  11. F. Over-pricing — to cover for the additional expenses incurred by the lagay, the dealers and procurement official mutually agree on setting the price, which are way above the authorized limits.

  12. G. Under delivery — again to cover for the additional expenses incurred by the lagay, the dealers and procurement official mutually agree that the quantity of the delivery will be lower than the one specified in the purchase order.

  13. H. Substitution — to circumvent certain prohibitions of the law, specifically the General Appropriations Act, where certain gov't agencies have no capital outlay and, therefore, cannot buy equipment, the dealer and the procurement official mutually agree to deliver items other than those stated in the purchase order.


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