SENATORS grilled former Budget Undersecretary Christopher Lao on Friday, and openly aired their disgust at the failure of his office, the Procurement Service of the Department of Budget and Management (PS-DBM), to do even basic “due diligence” on the background of winning suppliers in multibillion personal protective equipment (PPE) purchases using Department of Health (DOH) funds in 2020.
Senator Richard Gordon, chairman of the Blue Ribbon committee that held its second hearing on the Commission on Audit’s (COA) 2020 report on DOH “deficiencies” in managing P62-billion pandemic funds, scolded Lao for violating the most basic in procurement ethics that “It should never be supply-driven,” noting Lao’s admission that he had talked to several suppliers at the time.
Such casual attitude, the senators noted, may account for the total failure of PS-DBM to do due diligence on the suppliers, most of whom were engaged in businesses totally unrelated to making health-related items like masks and face shield since they were into construction, sale of cell phones, or hydraulics equipment, not to mention having small capitalization and filing fraudulent information with the Securities and Exchange Commission (SEC).
The PS-DBM is at the center of the COA’s flagged issues on account of the questionable wholesale transfer by DOH of P42 billion to it, and “outsourcing” the task of getting the vital PPE.
In the first hearing, Health Secretary Francisco Duque III justified the DOH’s failure to sign a memorandum of agreement with PS-DBM on the transfer of P42 billion of the total of COA-flagged pandemic funds.
On Friday, Senate Minority Leader Franklin M. Drilon exposed several warning signs of potential anomaly, corruption or fraud in the procurement of several medical supplies by PS-DBM.
“I am worried there are so many red flags in the procurement of several medical items. These warning signs indicate possible anomaly, corruption or fraud,” Drilon said at the continuation of the Blue Ribbon inquiry.
He cited as anomalous the choice of contractors of questionable qualifications with one contractor earning P284.9 million in 2020, from zero income in 2019, supposedly after bagging P8.68 billion worth of government contracts.
“Indeed, business is booming for these contractors. It appears that PS-DBM gave them the sure ticket to wealth. Nakakalungkot na habang marami ang naghihirap, mukhang marami rin ang nagpapayaman,” Drilon said in his statement.
Drilon said that contrary to the law’s clear requirement that negotiated procurement can only be entered into with persons who have the technical, legal and financial capabilities, PS-DBM entered into contracts with corporations of questionable qualifications.
The opposition senator questioned, for instance, why Pharmally Pharmaceutical Corporation bagged P8.68 billion worth of contracts. Incorporated only in September 2019, Pharmally has paid-up capital of only P625,000, obviously insufficient to assume the huge risk for the delivery of P8.68 billion worth of procurement.
After cornering P8.68-billion government contracts, however, Pharmally’s income soared to P284.9 million in 2020 from zero declared income in 2019. Its assets also jumped to P284.9 million in 2020 from P599,000 in 2019.
“Is it all thanks to PS-DBM?” Drilon asked.
Who endorsed Pharmally?
Senators led by Sen. Risa Hontiveros asked DBM OIC Undersecretary Tina Rose Canda “who endorsed Pharmally, but Canda said she was never involved in PS-DBM’s work.”
Former DBM Secretary Wendel Avisado also said he did not know who endorsed Pharmally.
Drilon reiterated that goods procured from Pharmally are overpriced.
Official records show that it sold face masks at a whopping P27.72, when other suppliers sold the same to PS-DBM at P13.5, P16, and P17.50 for the same period. It sold test kits at P1,720 when it could be bought at P925. It sold PPEs at P1,910 each when its market cost was at P945, according to Drilon.
Drilon wondered aloud why electronic companies cornered almost P2 billion worth of face mask deals with PS-DBM.
“The procurement of face shields is also shocking. The procurement of 1.32 million face shields went to a single company, Philippine Blue Cross Biotech Corporation,” Drilon noted.
Aside from face shields, Blue Cross Biotech was able to bag a total of P432.17-million contracts from PS-DBM, he noted.
Sen. Imee Marcos said it’s not just Pharmally and Cosmic Technologies Inc., also listed by Drilon as a supplier of face masks despite its questionable credentials, which got awards from PS-DBM.
According to Marcos, several others whose business is alien to manufacturing PPEs got supplies.
Upon grilling by Gordon and Drilon, Lao insisted they acted on the documents submitted to them by suppliers, such as documents given to SEC, the Department of Trade and Industry, and mayors’ offices.
“Our only concern then was it should arrive on time,” Lao told Hontiveros, because the pandemic was an emergency and it was hard to obtain supplies at that time because of a global supply crunch.