The Strange Case of Dr. Jekyll and the DBM Procurement Service

Published September 27, 2021, 12:12 AM

by Jaime Laya

WALA LANG

Robert Louis Stevenson narrates the story of Dr. Henry Jekyll, a talented and sociable doctor who concocts a serum that transforms him into the malevolent Mr. Edward Hyde. An updating could be on Netflix, the strange case of the DBM Procurement Service and Pharmally Pharmaceutical Corporation.  

In Congressional hearings, Senators including Risa Hontiveros and Richard Gordon and former Commission on Audit chief Grace Pulido-Tan have reported that the DBM Procurement Service awarded contracts of some ₱10 billion to Pharmally (initial paid-in capital, ₱625,000) and accepted delivery of reportedly overpriced 2,500,000 face masks without any purchase order.  

UNFOLDING MYSTERY The logos of the Procurement Service-DBM and PhilGEPS (Philippine Government e-Procurement System).

By way of background, the Procurement Service started life in 1976 as the Procurement Pilot Project of the Budget Commission. (The Commission became the Ministry of the Budget in 1978 and Department of Budget and Management in 1986.)

All government agencies need bond paper and the idea was, why not buy in bulk and save? With the approval of President Ferdinand E. Marcos, the pilot project was born in a U.P. Diliman Quonset hut located near the tennis courts by the Engineering Building. Its main asset was a second-hand paper converter that slit giant paper rolls into legal and 8½” x 11” sheets (no A4 yet). Packaged into 500-sheet reams, they were ready for delivery to national agencies and LGUs.  

There was a bit of initial resistance but soon enough the idea was accepted and the Pilot Project institutionalized as the Procurement Service on Oct. 18, 1978 under Letter of Instructions (LOI) No. 755:

 

  • Policy and operations were to be directed by a Procurement Council consisting of the Minister of the Budget as Chairman and as Members, the COA Chairman, the Ministers of Finance and of Industry, and the Presidential Assistant for Economic and Development Affairs. Note that COA was on the Council.
  • The Council was to adopt such pre-qualification and other requirements as will ensure that only reliable and adequately capitalized suppliers are chosen. Priority was to be given to companies registered with the Board of Investments and to companies that have no past due obligations with government financing institutions.
  • The list of items handled by the Council/Service was to include paper and office supplies and the most commonly used items of government usage as may be approved by the President. Note that it was not easy to add anything to the Procurement Service Menu.
  • The Ministries/Bureaus/Offices/Agencies of the government were to report to the Procurement Council, data on current purchases, as a means of cross-checking on the cost of items procured by the Service. 
  • To minimize fraternization and the temptations attendant thereto, the Service was to be staffed by persons on detail from the member-agencies of the Council and/or by contractual personnel. The office could not have any permanent employees.

The magic brew was invented in June 1989. Mrs. Corazon C. Aquino issued Executive Order No. 359 that reorganized the Procurement Service with mighty refinements that brought the small-time organization to the big-time, one able to enter into multi-billion deals worthy of Congressional inquiry.

  • The Marcos Procurement Council had the authority and responsibility over the agency’s operations. The Cory E.O. replaced the Council with the Procurement Policy Board. Management control was transferred to DBM. The COA Chairman was removed and user agencies were added, namely the Departments of Health, National Defense, Public Works and Highways, and Education, Culture, and Sports. 
  • A representative of the Philippine Institute of Certified Public Accountants (PICPA) replaced the COA Chairman. Mrs. Aquino’s E.O. provided, “In the formulation of said rules and regulations, the Procurement Policy Board may, in its discretion, consult the Chairman, Commission on Audit on matters falling under the functional jurisdiction of the Commission.” COA’s role was reduced to zero.
  • LOI No. 755 had authorized the Procurement Council to adopt Simplified Bidding Procedures. The authorization was explicitly continued under E.O. No. 359, giving the Policy Board total authority to adopt its own bidding rules. Procedures were evidently so simplified as to allow small newly-organized companies to win billion-peso contracts and deliver goods sans price quotation or purchase orders.

The same agency that budgets and releases funds could now buy anything at any price, under any terms. Dr. Jekyll had become Mr. Hyde.

From a rusty Diliman Quonset hut, the Procurement Service now occupies a large office and warehouse complex in Paco beside Malacañang Park, the former Metal Closure Plant of San Miguel Corporation.  

From bond paper, the New DBM Procurement Service has graduated to everything from face masks/shields to helicopters and awards billion-peso negotiated contracts to thinly-capitalized companies unknown to the Board of Investments and with uncertain beneficial ownership. With hope, Senators Hontiveros and Gordon, former COA Chairman Pulido-Tan, and other mystery story fans can discover more about the mysterious Mr. Hyde.

Note: A media report on Senate Blue Ribbon Committee Hearings states that PS-DBM “… awarded 42 billion COVID-19-related medical supply contracts mostly to foreign firms, including Pharmally.”

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