Second National Roads Improvement and Management Project (NRIMP2)

Second National Roads Improvement and Management Project (NRIMP2)
Joint Press Conference – Government of the Philippines and World Bank
May 14, 2008
Development Bank of the Philippines, Makati City

START (09:30 am)

MODERATOR:
Before we start our press briefing, we would like to thank the President and staff of the Development Bank of the Philippines, Mr. Ray David and his staff for allowing us to use this facility. Thank you so much DBP.

Good morning ladies and gentlemen and welcome to the joint Philippine government and World Bank Press Briefing on the occasion of the approval of the second phase of the National Roads Improvement Program. So, this is actually a happy occasion.

Today here with us, our three Honorable Secretaries; Secretary Gary Teves, Secretary Hermogenes Ebdane Jr., and Secretary Rolando Andaya; and joining them is our Country Director from World Bank Philippines, Mr. Bert Hofman.

We also have with us our partners of the program; Mr. Sam Zappia the Counsellor of the Australian Agency for International Development, AUSAID, and Mr. Vince Lazatin of RoadWatch, one of our Civil Society Organization partners of the program.

To start our program we’ll have our opening statements in the following order: Secretary Gary Teves, to be followed by Secretary Hermogenes Ebdane, and then Mr. Bert Hofman, and then Secretary Andaya. After which we’ll have the Q and A.

So please, Mr. Secretary.

SECRETARY GARY TEVES reads his statement

SECRETARY HERMOGENES EBDANE JR. reads his statement

BERT HOFMAN reads his statement (actual transcript of statement below)

Related Materials:
	Frequently Asked Questions
	Op-Ed: Building Better Roads through Fighting Corruption
	Project Information (PDF, 181kb)
	Project Map (PDF, 262kb)
	Press Release: WB Approves Road Project to Build Better Roads | World Bank Sanctions Firm For Helping Rig Bids In $150 Million Bank-Financed Philippines Road Project

This project is not just about building roads its about building stronger governments and fighting corruption, and the good news is, I think that the government, the World Bank, partners from civil society, AUSAID, and you to be frank have managed to do just that.

If you recall in the first phase, the World Bank rejected two large road contracts in three successive rounds of bidding because of very strong signs of collusion. This led to an investigation by bank’s Department of Institutional Integrity, the INT, that had the full support of the government. And the report of the INT has now has been completed and has been referred to the Government as well as to the World Bank’s so-called Evaluation and Suspension Officer, who is now looking into whether sanctions have to be imposed on the firms involved. But I think what we take from this today and from the board approval is that the project has taken the lessons from that investigation—has taken the best practice from around the world on how to deal with the difficult environment such as the one in Philippines and to make things work and still build roads and minimize corruption.

And how we’ve done it, well you’ve heard it already, a couple of special measures if you want to make this project special in the eyes of the World Bank, is the use of this independent procurement evaluator, which gives us, if you want a second opinion, it does not take away the responsibility from the government but it does give a second opinion on the bids and an expert opinion if you want to, or whether any… difficulties arose in a bid. Internally, more procurement controls in the Dept Public Works and Highways and a much stronger control procedure of the procurement process including a, if you want, enhanced vetting on bid-rigging and price inflation.

We’ve also seen much stronger internal controls and audit capacity within the Department of Public Works, and we’ve also seen an independent…of course the most special one that I think is the independent oversight by the civil society, the partnership with the Road Watch, which is not just about this project, its about the whole road sector. And I think the government is getting more and more involved with civil society. This project is spearheading this and I think in a major way, and I think Secretary Andaya will talk on this more.

Finally, what I appreciate most as Country Director is that the government has voluntarily adopted our new anti-corruption and sanctions guideline. This project started a long time ago and we have a different world but at that point the government signed up for certain guidelines, which could have applied to this phase. But actually the government said no, we want to be really tough on corruption, and we want to make sure that we can, together with the World Bank, really address corruption and impose sanctions, so they adopted our new guidelines which were passed by the board only a year ago. And a much tougher and much more effective in fighting corruption and the government has volunteered to adopt those so I’m very happy with that part.

The President of the World Back Mr. Robert Zoellick is very impressed with the commitment of the government of the Philippines. He had lots of praises yesterday at the board meeting. And he sees this project as an example of how a proactive stance on the part of the government, and working in tandem with the World Bank and Civil Society could go a very long way in strengthening the systems and combating corruption, while delivering what is in the end essential for sustaining growth in the Philippines, namely roads, Because roads are important for the Philippines, they’re important for the investment climate, such that more investment comes to the Philippines and therefore more jobs are created. They are also important for the farmers who can get their produce more easily to the market and therefore get a better price for their produce, and they’re important for you and me such that we can get quicker and more safer on roads built by the government.

SEC. ANDAYA:
Thank you very much, good morning. First of all let me say that, well thank you very much for the members of the media for being here this morning. This gives us the opportunity of both World Bank and National Government to explain and clarify certain issues.

First of course the good news, NRIMP 2 has been approved by the board which now clarifies the issue of a few months back, that this road project was suspended. Obviously you cannot suspend something which has not yet been approved for implementation. With that, let me clarify that. I’ve been trying to explain that all along…sometimes ayaw nyong maniwala e.

But now, it’s coming from Bert Hofman, saying that it has just been approved. So wala kang isu-suspend kung hindi pa nga naa-approve. And if you want to be technical about it—if you look at the 2008 budget, there is no…under the program budget, there is no NRIMP 2. Wala pa nga doon e…di ba? How can you suspend something which is not even in the budget? But now it’s in the budget. There’s a way to get around it… the legal way, but just to show you, please get the facts right, that’s why I’m explaining it to you.

Now this whole presscon, first I’ll explain to you, unang-una what happened last November gave us a chance, meaning to say us…World Bank, National Government, a chance to re-assess ourselves. What we have, what can be improved on the systems that we have…we all know of course we’re adopting World Bank rules and we are also, of course naturally on the side of the national government also, are pushing for our system. But you know there are things that you have to strike a balance, and this short period of time gave us the opportunity to talk in a sober environment—not through media, not through press conferences, not through the newspapers. But in a sober forum and actually come up with a better…a better system.

What are the key outputs? Tandaan niyo I’m explaining this to you in the context…you have to remember when you apply for a World Bank loan, it takes what? 24 months? 24 months. We were able to change the system in just five months. Imagine. The system of NRIMP 1 is now, compared to NRIMP 2, is different and we were able to change that in just five months. November, December, January, February, March…lima. It shows the commitment of the National Government, the commitment of the World Bank to work together, para maging transparent ito…yung ating sistema.

For me in my opinion as Head of the PTG, the Procurement Transparency Group, were the two main features. First is the renewed and enlarged NCB portion of the project. NCB is a…the component of this project which will use Philippine Laws in bidding. Philippine Laws ang gagamitin…batas natin ang gagamitin. Pumayag po ang World Bank na i-adopt yung sistema natin sa pag-bid ng proyekto nila because sila rin naman gusto…well on one hand its an admission that the Philippine Procurement System is world class. I don’t think the World Bank would agree to adopt it kung alam nilang pipitsugin yun, di ba? They agreed to it. So mas malaki pa nga yung amount ngayon na gagamitin for NCB. That’s a first. That’s a first. That’s a reform na pumasok.

Second, is the involvement of civil society. This program now institutionalizes the involvement of civil society in watching over projects and we would like to thank World Bank for this.

Alam nyo, from the point of view of Naitonal Government, lalo na kay President GMA, hindi naman sa pag-sipsip ha…but if we go back in history she was put into power by civil society, alam naman nating lahat yun e. And it is inevitable that she will again ask the help of civil society in protecting…diba…what the government has. Hindi naman ho responsibilidad lang ng gobyerno ang bantayan yung pondo e…responsibilidad din po ng mga tao ang bumantay. That’s why we are asking the civil society and more, and we're lucky that Vince Lazatin is here; he’s one of the officers of TAN. I know you’re here (to Vince)…part of Road Watch or Bantay Lansangan, but that’s for public works. Yung procurement transparency group po, for the whole national government yun…and he is also part of this. If you want to learn more about PTG, you want to learn more about the Road Watch, ask him. Wag na ho galing sa akin…siya na ho ang tanungin nyo (points to Vince Lazatin). Baka hindi kayo maniwala sa akin e…siya tanungin nyo.

Yung World Bank ho is a good vehicle for this because although public works ang pinaguusapan natin ngayon, ang World Bank alam naman natin, they’re not only involved in public works. They’re in DA by way of irrigation, they’re in DOTC. What we are trying to say is Road Watch, PTG, Bantay Lansangan, is now a national project. Not just in Public Works but in the entire bureaucracy. And the PTG, which Vince is there, I’m there, will be spearheading this. World Bank, hosting the PDF [Philippines Development Forum] in coming up with harmonized rules is actually…walking the walk…and actually leading the way, in trying to…alam nyo ho hindi madaling gumawa ng harmonized rules ha. It’s not easy. It’s not only World Bank. You have other institutions which might not see this issue in the same light.

So they’re showing the way…they’re leading the way…not just through public works but other departments and we hope that we will continue our efforts to come to an agreement. To an IRR-B. (Implementing Rules and Regulations-B)

So ayun lang po… magandang umaga po sa inyong lahat.

MODERATOR:
Thank you very much we thank all the distinguished gentlemen for their opening statements. And now we go to the open forum, we have less than 30 minutes for this open forum. What I would suggest is that we’ll have several questions in one round. So we’ll around have three questions per round.

I would highly encourage you to focus your questions on the program and on the opening statements that have just been said. This Q & A can go very quickly so it will be good if we really focus our questions. And this is an occasion…a happy occasion, actually to focus on the program…the newly approved…or just approved yesterday, the second phase of the National Roads Improvement Program.

And then I would ask you to please use the microphone over there…there are two microphones. Please state your name, the usual introduction - name and you media organization. And then after the first round of questions we’ll ask the panel to respond and then the next cycle would begin.

So now we open the floor for the open forum. Who will be the first brave person to come up to the microphone?

Please identify yourself—your name and your organization.

(OPEN FORUM PROPER)

QUESTION:
Good morning. Rose Fransisco from Reuters for Mr. Hofman. Sir, after the approval of this loan, are there any remaining concerns that the World Bank wishes to address in particular about the implementation because as we all know implementation is key, and the government’s record has been haphazard on this.

Second question for Mr. Andaya, are there any road projects up for funding assistance from any development partners like the World Bank? Any big ones such as this?

MODERATOR:
Thank you. Second question please.

QUESTION:
I’m Mitch Remo from Inquirer, this question is addressed to either Secretary Teves, or Secretary Andaya. Who will be composing the independent audit team, and specifically how will they be able to fulfill their objective of ensuring a corrupt-free implementation of the projec?

MODERATOR:
Thank you. The third question.

QUESTION:
Charo Logarta from ABS-CBN. It says here in box 1 that there’s a possible follow up under Philippine Law for the NRIMP1. So what happened to the investigation? Are there going to be people charged? And then the bidders, for NRIMP1 that were cited, will they be blacklisted for future projects?

MODERATOR:
Thank you. I think we’ll now return to the panel for their responses.

BERT HOFMAN:
Maybe I should start with the first and the last question. Of course we are at the start of implementation of NRIMP2 and the proof of the pudding is in the implementation but for now we are very confident that we have a very good design, and that the government has a very good project, and that within the project itself we have a lot of checks and balances that we’ve mentioned that actually give us confidence that we’re going to have good results and avoid corruption and bid-rigging which we have seen in the first phase.

From the World Bank’s side, we do supervision. Any project that the government implements we do supervision. So we have our own responsibility because this is such a large complex, innovative project. We on our side, we have increased our supervision funding to about double the normal amount. So we’re going to spend more time, monitoring this and were going to spend more time also in looking at some of the bids. We're going to give some of our expertise to the Department of Public Works and Housing, and to continue to a sort of technical advisory work to enable them to assess bids better and avoid bid-rigging and collusion. So that’s going to cost more time and therefore more budget if you want. So I’ve given the team more time and budget to supervise. So we are all excited about this project but we also want to learn from it, and again yesterday during the board meeting, lots of board members said: “Well, this is really interesting. So we want to know how this is going and we want to hear the lessons from the Philippines because maybe we could apply those lessons in other countries as well.” So that’s why were going to spend quite a bit of time.

On the last part, what happened to the investigation—I could talk on the bank’s side. The INT investigation was reported to the government, to the responsible authority, the Ombudsman, which of course is an independent office, and they have announced that they have started their own investigation and that’s ongoing.

From the Bank’s side, the INT has completed its investigation. And then the next step and it is also described in the handouts that we have given you…the next step in the process is that the so-called evaluation officer who can determine sanctions or not. After the evaluation officer has spoken then if the firms do not object, then whatever the evaluation officer has set becomes the sanction. If the firms that are implicated object, then we go to the sanctions board, which is more or less independent from the World Bank, and then they can then determine whether the sanctions suggested by the evaluation officer are going to apply. In other words the sanction process is in full swing. We expect the results to be there very soon. And is one of the key things that’s changed since November, we now make sure, and we have agreed with the government, the government will not start its bidding on the second phase; any of the packages, before the evaluation officer has spoken.

In other words those that were implicated in the first phase will not be able to bid in the second phase. And that gives us a lot of comfort.

SEC. ANDAYA:
For the question on the other road projects, there is one proposal from the World Bank, another one from JBIC. But what is important, if you look at the tarpaulin [map of NRIMP projects] at the back, all the green lines are for road projects to be funded by the World Bank and all the red lines will be funded by the JBIC. Why am I telling you this? Because JBIC is closely watching or monitoring the development of the harmonization rules of the National Government and the World Bank. Kung anong maging resulta nito, necessarily JBIC will have to follow. Why? Because if you look at the road projects, majority of the road projects are from World Bank and they necessarily will have to follow. World Bank is the leader in this. That’s why we’re grateful for them in actually adapting some of the Philippine rules. So nakakahiya naman kung mas maliit nga yung project mo hindi ka pa susunod, diba…so we decided they will have to follow the template in adopting the reforms being adopted by World Bank and the National government.

The next question on the Audit Team--the audit team will be composed of the members of the Public Works Department that would enable them to see if there is any collusion or bid rigging in the bidding process. Yun lang po yun, yung sistema, hindi kami kasama dun, it’s just internal to the Public Works department, so it’s actually giving them the capability on this aspect. And although I was not asked yung sa sanction, on the national government’s side, at very least, it should be blacklisting. In our opinion at the very least, [the sanction should be] blacklisting. But you have to understand again, the sanctions which Bert has been talking about are sanctions coming from the World Bank, not from the National Government’s side. We now again have to move forward and harmonize our rules on the process of blacklisting. Sometimes we get lost on whose system are we using, so we have to harmonize these things. [The] word is that one of those companies, part of the investigation, has already been blacklisted by Public Works Department. So obviously there’s a need to harmonize all these rules. Mas maganda pareho kami, dahil yang harmonization will affect not only the World Bank but also our other development partners so, again we have to move forward. And again I will emphasize the need for the IRRP. We’re doing it piecemeal eh, with World Bank only. But of course we have to go beyond that and include other development partners.

MODERATOR:
Thank you very much, we go to the second round.

QUESTION:
Hi my name is Roel Landingin, Financial Times. The underlying assumption in the listing of the anti-corruption measures which appears to be a hallmark of this project is--you’re saying--is based on lessons learned from the allegations, and reports of bid collusion and over pricing in two or three World Bank funded projects under the first phase. But is there now a consensus, or even unity, between the World Bank and the Philippine government, and the DPWH, in particular, about precisely the lessons or exactly what happened in those biddings.

The INT has described its findings as a cartel of Contractors engaged in corrupt and collusive practices, but I remember from Mr. Ebdane’s Press Conferences last year, he doesn’t, or at least at that time, they don’t seem to share the findings, that there was collusion. You were saying that the DPWH followed procedures and in fact you were surprised why the World Bank kept on rejecting the bid results.

So if there’s such a basic disagreement, what’s the quality of those measures if you have that basic disagreement,   what exactly happened, and maybe even lessons from it.

So, the question is, can Mr. Ebdane share with us his views on whether it has changed in the past six months and whether he now shares the World Bank’s conclusions about exactly happened in those biddings between 2003 and 2006.

QUESTION:
Hi, I’m Doris Dumlao of the Philippine Daily Inquirer. Secretary Andaya, could you clarify how the World Bank has incorporated your proposal on putting a ceiling on bids for procurement, because the way you said it, they’ve agreed to adopt it but I understand that it will be adopted only for projects worth 5 million and below.

And if you’re confident that even without the incorporation of that bid ceiling for all projects, are you confident that we’ll get rid of all the collusion and irregularities for this next NRIMP?

MODERATOR:
Thank you, Doris.

BERT HOFMAN:
I can’t speak of the past and Secretary Ebdane should talk about his evaluation of what happened in the bids. I think one of the complications is that INT report is not public and I haven’t seen the full detailed report myself. That’s how strict the World Bank rules are in this respect. But I think there’s no disagreement on the way forward. Irrespective of what exactly the evaluation is in the past, what we have on the table today is a project that we all agree on, and it’s the Government’s project and the World Bank supports this and that was measured irrespective of what exactly happens in those two bids. It seems to be a good design to address the difficult situation that the Philippines is facing, to build better roads and improve governance. So, I think there’s no disagreement on that point. But the Secretary should talk about his views on the past, what he thinks happened.

SEC. EBDANE:
First is, please be reminded that I talked over in February of 2005 and in 2006 that was the third bidding for the three projects of the World Bank. Of course, we did our best only to find out that the World Bank had disapproved the result of the biding in 2006. We did some inquiries and in so far as the DPWH is concerned, during my watch, we did what we thought was right based on available data and documents. Frankly, I was surprised and so we had to go back to historical data which were the biddings done in 2003 and 2004. By that time the World Bank informed us of the potential collusion. Since the bottom line here is the completion of the project on time; we have a specific time-frame for this project to be finished. It takes time to do the work, especially the civil work. My contention is that if we would like to have the project finished on time, we’ve got to do something drastic about it. If we will request for another bidding, that will take few more months or even a year. We will not finish this one. So I requested our President that, if possible, we can just forgo with other biddings and, if possible, infuse local funds. So the president approved my recommendation and we provided local funds for the project.

Now in so far as our contingent is concerned, I said that and I was referring to the time during my watch that what happened, because the bidding was done based on the pricing that was so indicated. When World Bank informed us there was an ongoing investigation, I directed a DPWH official to dig deeper on the case with the view of providing more insights and perhaps documents to the investigating agency as necessary. We even informed the World Bank that the proper agency in the country that is so authorized is the Ombudsman, which handles corruption cases against government officials and the like. Now in so far as agreement or disagreement is concerned, I think you might be referring to the time frame. I cannot answer for what happened in the first two biddings and I was only referring the third bidding which I requested that we forgo if only to be able to finish the project.

MODERATOR:
Thank you, sir. Mr. Andaya?

SEC. ANDAYA:
Yes thank you very much. Then we'll just carry [the] sentiment of Sec. Ebdane moving forward, from the national government side. What happened in the past, things were learned but what we’re doing now is what both sides think is doable in terms of reforms. As a lawyer, my being here does not in any way admit or can be quoted as those finding by the INT or conclusive or whatsoever. I am not in the position to say that. Likewise I’m not in the position to say it’s true. I can even say if it’s false. What can we present to you is the way forward. You should view this as a continuing process of harmonizing the rules.

Let me now dovetail my answer to the question regarding the NCB. The NCB, central to this of course, is the process being adopted. A lot of questions on collusion, on bid-rigging but if you go down what the main issue is, does the system or process being adopted either by the World Bank or by the Philippine government, does it allow things like this to happen like bid rigging. Kaya nga in this situation both sides gave their suggestions on how we can improve and both sides agreed to the reforms. The World Bank, as a reform, included this independent assessment or auditor which enables the Public Works Dept. to use technology or know how which, hindi natin alam eh, this is new also to us. In that sense they’re giving this technology to us for free. Something we can learn from, something we can adopt for future projects. But we’re not sure; we will see. It is the first time we’ll adopt it. At the same time, duon sa NCB, they also allowed it to happened. We are also, at this point, still selling that idea that the NCB, our own process of bidding, is better. We won’t force it but we know it’s better but we have to prove it to them. And we’re grateful that they gave us this opportunity to prove it. How? Last NRIMP 1, NCB projects only totaled around 3 million. Now it has doubled to 6. So they’re doubling our chances of actually convincing the World Bank that our system, I won’t say it’s more superior, but that it’s better for the Philippine setting. That’s what we’re saying. But it’s also a policy of the World Bank to adopt country systems and them doubling the amount from 3 million to 6 million dollars, for us, speaks a lot. They’re doubling our chances. They’re doubling the chance of the PTG or national government to convince the World Bank. Friendly na laban ito eh, it’s a friendly match. It’s not one trying to put one over the other but perhaps trying to convince each other which system is better. And this NRIMP2 encapsulates that working relationship. But we're still in the process. This is the way forward but we still have a long way to go and we’re convincing each other on which system is better. But definitely the system we have now for NRIMP 2 is a lot better than NRIMP 1.

Let me just correct myself I said 3 million pesos. It’s 3 billion pesos to 6 billion pesos.

MODERATOR:
Thank you and very much. Well said, Sec. Andaya. They have follow up questions. By the way, we also have other people who you can throw questions to. We have Mr. Zappia [Counselor, AusAID] and we have Mr. Vince Lazatin [Executive Director, RoadWatch]. We’re now going into the last round of questions.

QUESTION:
Sec. Andaya, are you confident that even without the ceiling on bids for majority of the projects under this second phase that there won’t be a recurrence of coalition and bid rigging?

SEC. ANDAYA:
Yung ABC [above business cost] is always been a battle cry of the national government but sometimes you have to think that the presence of World Bank is not just in the Philippines; it’s also in other countries. They’re adopting that system. Maybe let’s also give them a chance to prove the case. That’s why twin reforms—the doubling of the NCB, which gives us double chance to proving ourselves, and also at the same time the World Bank imposing upon itself and also helping DPWH in coming up with better capabilities in determining if there’s any bid rigging. Bago yun eh, it came from them. It’s a technology, a system that they are using, they adopted in the investigation. Maybe we should so take a look at that, that it could also help us.

BERT HOFMAN:
Let me say one word on the two systems because it’s easy to point out differences. But there’s a lot coming out between the World Bank bidding system and Philippines procurement law. And the fundamental principles of competition and transparency we share. And this is more of the details but we have had some debate and we continue to debate on what is the right way forward. And we have adopted the national rules on the national competitive bidding. But both of our systems say that increasing transparency and increasing competition for any kind of bid, so opening the access that’s the key to the best possible value for taxpayers’ money. And so we have no disagreement there whatsoever.

SEC. EBDANE:
There are indicators that we can look at nowadays. One good thing to see is when there are lots of contractors bidding for the project. The more contractors, the better. And the one problem with the packaging before was that they are too huge that the contractors who qualified to bid were mostly foreign contractors, except for a few local contractors. In NRIMP2, we have repackaged it in such a way that the average funding ranges from 500 to 600 million therefore more local contractors can qualify. So we have actually leveled the playing field and with the involvement of civil society, I think we can do better this time.

MODERATOR:
Thank you, sir. Now we’re really going to the last round.

QUESTION:
I’m Max Estayo from Malaya. This question is addressed to Sec. Andaya. Sir, I remember you once talked about the difference between Philippine rules on setting bid thresholds compared to that of the World Bank. And you said that under the Philippine bidding rules, you set a threshold and contractors bid below threshold, compared to the World Bank where you set a threshold and contractors bid above that threshold. So you’re saying that we’re adopting more of our system than that of the World Bank. In the first phase, it was World Bank’s procurement system that was put in place, that resulted in the rigging. I want a clarification, sir, if that’s the system that was not in place on NRIMP1 that resulted in the rigging.

MODERATOR:
Thank you and next question please?

QUESTION:
I’m Patricia de Leon from GMA News.TV. This is specifically for the DPWH Secretary but others can answer also. How would you make sure implementation of this project is efficient considering the NEDA just released data that there are 19 foreign-funded infra projects that have incurred over 31 billion in cost overruns and of this 40% are projects being executed by DPWH?

QUESTION:
Good morning, sir. I’m Roderick dela Cruz of Manila Standard Today. The National Roads Improvement Project is a very significant project. How can the government and the World Bank cooperate in such a way that the several alleged irregularities in several components of the project will not affect the progress of the whole project?

MODERATOR:
I’m sorry to say I think that should be our last question because we should afford some time for the gentlemen to respond to the questions. Maybe we could start with whoever we have questions for, Sec. Andaya and Sec. Ebdane, and then the general questions for everybody.

SEC. EBDANE
When we talk of bidding, it’s either based on the Republic Act 9194, we have the ABC which we have to comply with. But of course with international bidding as indicated by the Department of Justice, there are correlations between domestic law as practiced internationally. Now talking of the bids above and below ABC, there are several reasons why bidders go above ABC. Of course, first is they want to earn more than what they are allowed. We have actually experienced some bidding before where the winning bid was 25% to 30% above ABC. During my time, there was a bidding where the lowest bid was 26% above ABC. What I did was to inform them that I have to disapprove the winning bid. We communicated and I requested them to lower the amount. We tried to establish an amount near the ABC but reasons stated in their bid document, it was not possible. So at the end of the day, the 26% went down to 14 or 13% above ABC. But that was good enough because it was a foreign funded project.

Now on one hand, any bid below 20% below the ABC is not healthy. Most probably the project will not push through and there might be some reasons why that happens: some people just would like to sabotage the projects or they just want to prove something. So the threshold that we’re talking about is within a certain percentage below and above. I think the secretary of budget management can better answer that

Now in so far as cost overrun is concerned, where 40% relates to DPWH projects, we had a cabinet meeting yesterday and this was actually discussed because the NEDA board had actually disapproved further funding for these projects. Except for some projects that need special attention (where if we do not continue with the construction what you have done will come to note) and so we are coming up with justifications that come from the ground and we will be facing again the NEDA board on this. But from the three specific projects that were mentioned, we have forgone with the bigger project because it’s not needed anyway…soon, perhaps later. Except for the one that involves flood control because that project protects a bigger slice of a province and the non-completion of the project will mean disaster come rainy season.

BERT HOFMAN:
Alright, let me add a little bit on the cost overruns, speaking for the international community, I guess. I guess both in domestically financed and internationally financed projects, cost overruns, for an array of reasons, sometimes it is truly an honest mis-estimate, that the cost estimate is not accurate. Or, as what has been happening over the last year or so, quite a bit, is that there’s cost overruns in dollars, but not in pesos. And for the internationally financed ones, there you have, because of the appreciation of the currency could become quite a bit more expensive. So we have to struggle with the peso appreciation. 

The way the Bank and also the Government deal with that is that there are rules that allow or do not allow for the cost overruns. So if our clients come back and say, oh we have a cost overrun. If it becomes more than a certain percentage, and I think it’s actually 15 %, we’ll say, well, wait a minute, let’s analyze that. And NEDA has now decided to have similar rules. I think that’s very good. If your cost overruns become large, you’d want to analyze it. And so you just see what the causes are and from there you just have to justify. But sometimes they signify something else. Now one needs to look at it more in depth. So those rules are now being established and as Secretary Andaya said, harmonizing those rules from the government and the international community would be very good, but is not something with just exception to the Philippines, and as of late, because of the peso appreciation, it happens more and more.

The final question was, I thought, was an interesting one. My interpretation is that it is actually the challenge. Because the needs are big there, not just roads but also in schools, and hospitals and other things that need funds. The needs are big there but at the same time, the Philippines, like many other developing countries, faces challenging environments, and issues of governance, and issues of corruption. No one needs to deal with that. So, building up an enormous array of safeguards also means that in a way you can’t deliver anymore.

And sometimes what’s debated in a very difficult environment is to take, for instance, the procurement out of the hands of government. An international, independent procurement agent, separate from the government. That slows down things, but also it doesn’t build capacity within the government which we really think is really important.

So what I was trying to say, on this project, we decided to not go that way. We let the Department implement because that’s the most efficient way to do it. And it also builds the capacity within the government where it is needed.

So, one has always has to look instead at how to strike the balance between the needs of development and getting the projects done, and the need to safeguard the money for the Philippine taxpayers. Well that’s a difficult balance but if one has too much safeguards, if you will, nothing will go because it becomes too complex in implementation. So, we think that this project has exactly the right balance. It minimizes the chances of collusion and corruption. One could never exclude it. One could never exclude that something will happen, but we think that this project and the set up with independent monitoring, the independent procurement evaluator with our supervision, actually minimizes the chances of this happening.

SEC. ANDAYA:
I was going say that the last three questions, namely the question regarding the system used in NRIMP1 and NRIMP2; the question on cost overruns; the question on irregularities, cannot be answered by one, just one. And it shows you that the problem we’re facing now is not just NRIMP. It’s not just a road project, but it’s the system of harmonizing all the laws, all the rules we have here. Let’s remember that every road project, or any project that’s foreign funded—JBIC, World Bank, ADB, name it—kanya kanyang rules yan. They have their own set of rules, they have their own idiosyncrasies, they have their own uniqueness, and we have to come to terms with this. And the World Bank was correct in sponsoring the PDF and spearheading, and coming up with an IRR-B. What is IRR-B? Implementing Rules and Regulations, dash B. Dash B means it will be applied for foreign-funded projects, any kind of foreign- funded projects. Ito na yung batas na susundan natin.

Kaya magandang balita ito because nakakalito e. You always have the tendency of looking into Philippine Laws and comparing it with other Laws. And you sometimes forget na magkaiba yung dalawa—they’re at opposite poles.

And central to this, the easiest to understand is the ABC, the issue of the ABC. In our setting we cannot fathom why you cannot bid above the agency’s ceiling, or the ABC. But you know, if you play the devil’s advocate, in another sense, we should also try to understand bakit may ganung sistema sila? Na you can bid above. Example, lagi natin sinusundan ang sistema ng United States of America. They are allowed to be above the ABC. And maybe you can draw your own conclusions on the quality of the public works between the United States and the Philippines. Maybe it’s a better system…maybe…di ba? Yun ang maganda dito…it’s a work in progress…we’re trying to convince each other which is the better system.

Yung cost overrun, again…yun din yun. In that NEDA report, it never stated na kanya-kanyang sistema rin yan. Each package has its system of cost overruns. And it has gotten to the point, and to the attention of the government na masyadong malaki na ito. Yes, it is legal. Yes, it is in the loan package. Yes, we can pay this. Yes, they can legally demand this. Pero parang kanya kanya na ata yung diskarte. Each has his own rules and it’s getting out of hand. And the PTG and the GPBB has been tasked by the President likewise to harmonize these rules on cost overruns. It’s getting to the point that its catching her attention.

And cost and cost estimates, kanya kanyang rason yan e…project design; costing ng project; even now, itong—let’s call a spade a spade…when this loan was applied for, the assumption was that the dollar was 1 is to 55. Ano na ba ngayon? 40? 42? Obviously may problema na tayo doon…obviously.

So all these things need to be taken into consideration—in a harmonized set of rules for cost overruns.

MODERATOR:
Ok. Thank you very much. I understand that there’s still some persistent questions maybe but we have exceeded the limit of our press conference. We thank all of you for coming.

END (10:35 am)