'KINDER, GENTLER' PROBE
The debarred firms may also fare better dealing with the DPWH, which has, rightly or wrongly, become notorious for clearing those accused by the likes of World Bank of any wrongdoing.

In 2002, the DPWH conducted an investigation after the World Bank rejected the outcomes of two out of 11 tenders for several components of the first phase of the Bank-funded National Road Improvement and Management Project (NRIMP I) because of suspicions of overpricing and collusion.

China Road and Bridge Corporation won one of the two disputed tenders — for road projects along the Surigao Davao Coastal Road — offering a bid 27.8 percent higher than the approved budget contract (ABC).

The other tender — for the rehabilitation of a road in Negros island — was won by a joint venture of AC Luna Construction Corp and China State Construction Corp, which offered a bid that was 25.5 percent higher than the ABC.

In June 2003, then DPWH Secretary Simeon Datumanong appointed a three-person panel to investigate a similar accusation of collusion. The panel was composed of lawyer and internal audit services director Camilo Foronda, project assistance division chief Carlito Nacional, and contract management division head Constancio Fernandez.

The panel examined the documents submitted by the bidders for any sign or indication of collusion, giving special attention to unit cost analyses. It also summoned representatives of the lowest bidders — China Road and the joint venture of AC Luna and China State — to explain their bids.

At the end of the 11-day investigation, the panel concluded that there was no sufficient evidence to support the World Bank’s suspicions of collusion among the bidders. Said the panel in a June 23, 2003 report submitted to Datumanong: “The bidders’ unit cost analyses differed from one another. There were substantial variances in the unit prices for many items of work. No definite pattern was observed in the computation and the unit prices did not show unusual coincidences or follow a designed pattern.”

“Since suspicion of collusion by the Bank, as noted, is very hard to prove,” it added, “corollarily, there are neither bidders nor Department officials who can be said to have participated therein.”

Still, the panel recommended that the tender won by China Roads and Bridges Corp. should be declared a failure because the winning bid, which was 27.8 percent above ABC, was too high compared to bids in adjacent projects. Still, the panel urged the DPWH to uphold the award of the other project to the joint venture of EC Luna and China State even though the bid was also nearly as high — 25.5 percent above ABC. “This contract package has no adjacent projects with which a comparison can be drawn,” it explained.

BANK WON'T BUDGE
The DPWH conducted its second investigation, or what Ebdane refers to as a “study,” after the World Bank rejected the outcomes of the second round of tenders for two subprojects in 2004. The tenders were won by China Roads and Bridges Corp., which offered a bid of 27.18 percent above ABC, and a joint venture of AC Luna Construction Corp and China Roads and Bridges Corp., which bid 24.83 percent above ABC.

After refusing to award the two contracts to the lowest bidders because of what it believed were excessive bids, the World Bank proposed to hire an independent engineering specialist to assess the bids offered during in the latest tender.

Hoping to persuade the Bank to award the contracts instead, Ebdane, in a June 22, 2005 letter to the financial institution, presented a study conducted by a DPWH project monitoring office that showed “the reasonableness of the lowest evaluated bids submitted during the bidding of the subject Projects compared to the current price levels.”

By updating the approved budget for contracts using unit prices used in a couple of recently tendered projects, DPWH project director Mario Bandelaria showed that China Roads’ original bid of 27.18 percent above ABC in 2004 was down to only 11.28 percent above ABC by 2005. The premium over ABC of AC Luna and China Roads’ original joint bid of 24.83 percent fell to only 9.63 percent.

The World Bank, however, was not convinced by the DPWH’s efforts to justify bids submitted the previous year by the simple expedient of comparing them to current prices.

The following year, 2006, the DPWH held the third round of tenders for the road projects. When the World Bank again rejected the bid results, the DPWH no longer bothered to investigate. Ebdane took the sub-projects out of the World Bank-funded program and implemented the same as locally funded projects.

COOPERATION AMID CONFLICT
Remarkably, the World Bank and the DPWH have managed to cooperate to address weaknesses in the bidding process and reduce the likelihood of collusion and overpricing in spite of their starkly opposite conclusions about the allegations of collusion.

Prompted by a series of World Bank rejections of the bidding results, the DPWH introduced changes in the tendering procedures. These included removing the pre-qualification requirement to open up the bidding to more contractors, the establishment of call lines for any party to report any deviation from the published procedures, and inviting civil society groups to witness the auctions.

Last year, the Bank’s board of directors finally cleared a stalled $232-million loan for the second phase of NRIMP after the DPWH adopted “comprehensive anti-corruption measures,” including the establishment of a civil society group to monitor road projects.

Approval was frozen in November 2007, in spite of favorable recommendation from the World Bank management when directors asked INT investigators to first complete a four-year probe into bidding irregularities in the first phase of NRIMP.

The World Bank and the DPWH are also working to narrow the policy gap on bid ceilings. Philippine procurement law automatically disqualifies any bid above the ABC but guidelines of the World Bank and other lenders disallow such ceilings that interfere with market forces.

The Bank has agreed to use the country’s rules on a few small-scale road projects reserved for Philippine construction firms to see if the policy can help reduce collusion. The Bank, however, backed off from a pilot initiative to apply the bid ceiling on international tenders for road projects in the Philippines.

The INT discussed its probe as well with representatives from the Office of the Ombudsman three times in 2006 and 2007. In July 2006, a deputy Ombudsman even went to Washington DC for extensive briefings on “how the cartel operates,” said a World Bank official.

The official also said that in November 2007, Ombudsman Merceditas Gutierrez received a copy of the INT report after a two-hour meeting where she was provided “with a detailed investigative roadmap, including the names of all companies and bribe recipients found through the Bank’s investigation, which bidding documents would corroborate (the Bank’s) findings, as well as how the collusive scheme operated on this project.”

More than a year after receiving the INT report, the Office of the Ombudsman said it was still completing its fact-finding investigation.